Startup Ecosystems of Silicon Valley and Bangalore Depiction and Comparison
112
Startup Ecosystems of Silicon Valley and Bangalore: Depiction and Comparison Sébastien Bianchi Master in Management HEC Lausanne Supervisor: Pr. Dr. Yves Pigneur Expert: Dr. Balz Strasser Bangalore, academic year 2014 – 2015 This work is carried out under the Master in Management at the faculty of Business and Economics of the University of Lausanne and the internship program at swissnex India in Bangalore.
-
Upload
sebastien-bianchi -
Category
Documents
-
view
44 -
download
6
Transcript of Startup Ecosystems of Silicon Valley and Bangalore Depiction and Comparison
Startup Ecosystems of Silicon Valley and
Bangalore: Depiction and Comparison
Sébastien Bianchi
Master in Management
HEC Lausanne
Supervisor: Pr. Dr. Yves Pigneur
Expert: Dr. Balz Strasser
Bangalore, academic year 2014 – 2015
This work is carried out under the Master in Management at the faculty of Business and Economics
of the University of Lausanne and the internship program at swissnex India in Bangalore.
1
Acknowledgements
I would like to thank all the people who supported me in the completion of this
final Master thesis. First and foremost, I am grateful to my supervisor, Professor
Yves Pigneur from HEC Lausanne, and to my expert and CEO at swissnex
India, Dr. Balz Strasser; they have been source of support and guidance.
Moreover, this Master thesis would not have been complete without the
contribution of different personalities I made interviews with from May 2015 to
June 2015: Vikram Ahuja, Jai Asundi, Sartaj Anand, Ajay Bam, Alisée de
Tonnac, Aditya Ghose, Suhas Gurumurthy, Prateek Khare, Rishikesha T.
Krishnan, Mauktik Kulkarni, Hervé Lebret, Barbara Maim, Harshith Mallya,
Rich Mironov, Srinivas Padmanabhuni, Tej Pochiraju and Govind Shivkumar.
Furthermore, it is a real pleasure to acknowledge Nikita Sharma for her
proofreading of my work, as I am not a native English speaker/writer. Finally, I
really appreciated the support of my sister, Caroline Bianchi, and my dear friend,
Romain Roulet, for the reading of my work and their insightful commentary.
2
Abstract
This academic thesis takes into consideration the startup ecosystems of Silicon
Valley (United States) and Bangalore (India). Bangalore is a city where
considerable efforts have been dedicated to the promotion of the innovation since
more than one decade. Today, in India, the city of Bangalore exemplifies a
successful and world famous ecosystem of innovation which was comparatively
set up decades ago in Silion Valley. Therefore, I took the opportunity of doing an
internship at swissnex India in Bangalore to explore this startup ecosystem and
depict its features in comparison with Silicon Valley’s. Even though there are
differences between United States and India based on culture, society and
economy, as to the structure of their respective startup ecosystem we can for sure
draw points of analysis to identify and understand the levers by which innovation
and entrepreneurship can be fostered to make a startup ecosystem successful and
drive economic development in a region: high-impact entrepreneurs, community
and culture, government and regulation, universities and education, incubators and
accelerators, and capital sources.
Keywords: innovation, entrepreneurship, startup, ecosystem, Bangalore, Silicon Valley, SWOT
3
Contents
Acknowledgements ...................................................................................... 1
Abstract ................................................................................................... 2
Figures .................................................................................................... 6
1. Introduction ............................................................................................ 7
1.1 Points of interest ................................................................................... 7
1.2 Methodology....................................................................................... 7
1.2.1. Type of sources .............................................................................. 8
Secondary sources ............................................................................... 8
Primary sources .................................................................................. 8
1.2.2. Analysis Tools ............................................................................... 8
Six-Factor Ecosystem Scorecard ................................................................ 8
Value Proposition Canvas ....................................................................... 9
SWOT ........................................................................................... 10
1.3 Limitations ........................................................................................ 11
2. Innovation and Startup Ecosystem .................................................................. 12
2.1 What do innovation, entrepreneurship and startup really mean? .............................. 12
2.1.1 Innovation .................................................................................... 12
The concept of novelty ......................................................................... 14
The concept of utility ........................................................................... 17
2.1.2 Entrepreneurship ............................................................................ 18
Product/service and market risks ............................................................... 20
Financial risks ................................................................................... 21
Team risks ....................................................................................... 21
Execution risks .................................................................................. 22
2.1.3 Startup ........................................................................................ 23
2.2 What is a startup ecosystem about? ............................................................. 26
2.2.1 Introduction .................................................................................. 26
2.2.2 What are the different stakeholders of a startup ecosystem? .............................. 27
High impact entrepreneurs ..................................................................... 28
Community & culture ........................................................................... 28
4
Government & regulation ...................................................................... 28
Universities & education ....................................................................... 29
Incubators & accelerators ....................................................................... 29
Funding & capital sources ...................................................................... 30
2.2.3 What makes a startup ecosystem successful? .............................................. 32
Talent ............................................................................................ 32
Density .......................................................................................... 34
Culture ........................................................................................... 35
Capital ........................................................................................... 36
Regulatory environment ........................................................................ 37
3. Silicon Valley ......................................................................................... 40
3.1 Introduction ....................................................................................... 40
3.2 High tech innovation, lean startup and design thinking ........................................ 41
3.2.1 High tech innovation ........................................................................ 41
3.2.2 Lean startup .................................................................................. 42
3.2.3 Design thinking .............................................................................. 43
3.3 Stakeholders and key components ............................................................... 46
3.3.1 High impact entrepreneurs .................................................................. 46
3.3.2 Community & culture ....................................................................... 47
3.3.3 Government & regulation ................................................................... 49
3.3.4 Universities & education .................................................................... 50
3.3.5 Incubators & accelerators ................................................................... 51
3.3.6 Funding & capital sources .................................................................. 52
3.4 SWOT ............................................................................................. 54
4. India’s Silicon Valley: Bangalore ................................................................... 55
4.1 Introduction ....................................................................................... 55
4.2 From Jugaad to frugal innovation ............................................................... 57
4.2.1 Jugaad ....................................................................................... 57
4.2.2 Frugal innovation ............................................................................ 59
Using disruptive innovation: Forus Health .................................................... 61
4.3 Stakeholders and key components ............................................................... 62
4.3.1 High impact entrepreneurs .................................................................. 62
5
4.3.2 Community & culture ....................................................................... 63
4.3.3 Government & regulation ................................................................... 66
4.3.4 Universities & education .................................................................... 67
4.3.5 Incubators & accelerators ................................................................... 69
4.3.6 Funding & capital sources .................................................................. 71
4.4 SWOT ............................................................................................. 72
5. Silicon Valley vs. Bangalore: Comparative discussion ............................................. 73
5.1 Similarities ........................................................................................ 73
5.1.1 Origins: military contracts, technology institutes and big companies .................... 73
5.1.2 Talent ........................................................................................ 74
5.1.3 Media and visibility ......................................................................... 75
5.2 Differences ........................................................................................ 75
5.2.1 Entrepreneurial culture and community .................................................... 75
5.2.2 Role models .................................................................................. 77
5.2.3 Innovation flows and type of reach ......................................................... 77
5.2.4 Types of innovation: Low tech vs. high tech............................................... 79
5.2.5 Lean startup methodology .................................................................. 79
5.2.6 Quality of support to startups ............................................................... 80
5.2.7 IP protection ................................................................................. 81
5.2.8 Synergies with the education system ....................................................... 82
5.2.9 Facilities and infrastructure: standard of living ............................................ 82
5.2.10 Funding environment ...................................................................... 83
5.3 Performance and potential ....................................................................... 85
6. Conclusion ............................................................................................ 87
7. References ............................................................................................ 89
7.1 Works ............................................................................................. 89
7.2 Websites .......................................................................................... 91
8. Appendix .............................................................................................. 98
8.1 Startup development phases and funding timeline ............................................. 98
8.2 Domains of the entrepreneurial/startup ecosystem ............................................. 99
8.3 The Global Startup Ecosystem Index ......................................................... 100
8.4 Silicon Valley vs. Bangalore: Statistics ....................................................... 101
6
8.5 Interviewing guide ............................................................................. 104
8.6 Profile description of the interviewees ........................................................ 105
Figures
Figure 1 - Value Proposition Canvas (Osterwalder, 2012) .................................................................. 9
Figure 2 - SWOT (Team FME, 2009, p. 6)........................................................................................ 10
Figure 3 – Technology progress versus market impact (Carpenter, 2009) ........................................ 16
Figure 4 - The natures of innovation (Kalbach, 2012) ....................................................................... 16
Figure 5 - Venture phases and funding (Lünendonk, 2013; Market Revolution, 2014) .................... 25
Figure 6 – Differences between supportive programs (Crowell, 2013) ............................................. 30
Figure 7 – Value Proposition Canvas of Uber (Boeckel, Sprunger, Smith and Work, 2012) ........... 44
Figure 8 – Value Proposition Canvas of Drone GoPro ...................................................................... 45
Figure 9 – Networks and platforms (main source: swissnex San Francisco, 2014) .......................... 49
Figure 10 - Institutes (main source: Kenney, 2000)........................................................................... 51
Figure 11 – Incubators/Accelerators (main source: swissnex San Francisco, 2014) ......................... 52
Figure 12 – Actual stage distribution (Startup Genome, 2012, p. 12) ............................................... 53
Figure 13 - Funding sources (Startup Genome, 2012, p. 12) ............................................................. 53
Figure 14 - The interwined factors at the BOP (Ruohonen and al (eds.), 2012) ............................... 56
Figure 15 - Jugaad - The Art Of Converting Adversity Into Opportunity (Forbes, 2014) ................ 58
Figure 16 – Whatsapp vs. Hike: How does Hike differentiate itself from the leader? (Raina, 2014)61
Figure 17 – Value Proposition Canvas of Forus Health (forushealth.com, 2015) ............................. 62
Figure 18 – Networks and platforms (main source: Sulochana Development Trust, 2014) .............. 66
Figure 19 - Institutes (main source: Wikipedia, 2015) ...................................................................... 68
Figure 20 - Incubators in Bangalore (main source: Padmanabhan, 2014) ......................................... 70
Figure 21 - Accelerators in Bangalore (main source: Padmanabhan, 2014) ..................................... 71
7
1. Introduction
1.1 Points of interest
Supported by different agents that constitute the nature of a startup ecosystem, innovation is made
possible only when preconditions, which facilitate the activities of the innovators, entrepreneurs,
advisors, investors and other stakeholders, do exist.
This work aims at identifying different and key stakeholders of any startup ecosystem and provide a
better understanding of the interactions between each other. The comparison between Silicon
Valley and Bangalore helps in raising up how the cultural and socio-economic background of a
region impacts on the nature of its innovation and its startup ecosystem. Therefore, the case of
Bangalore is paticularly appropriate since it allows us to closely examine and analyse how this
emerging place in Southeast Asian region is approaching innovation and entrepreneurship and what
are the existing similarities and differences that exist with the Western refence of Silicon Valley.
The fact of living and working 6 months at swissnex India in Bangalore (from February to July
2015) enabled me to learn much more about the stakeholders of the startup ecosystem here and
made it easier for me to get in touch with different on-site experts I conducted interview with.
“Since United States and India have very different socioeconomic situations, can
we depict points of comparisons regarding their famous respective startup
ecosystem; Silicon Valley and Bangalore?”
1.2 Methodology
In this work, I define first what innovation and entrepreneurship really mean and what levers, stages
and stakeholders make a startup ecosystem successful. Then, I separately introduce the startup
ecosystems of Silicon Valley and Bangalore. For each of these startup ecosystems I describe the
type of innovation which is the most characteristic and give details about each of the stakeholders of
the startup ecosystem. Further, a comparative analysis enlightens the similarities and differences
between Silicon Valley and Bangalore, where insights of experts support the contents.
8
1.2.1. Type of sources
Secondary sources
In the bibliography section at the end of the work you will find the secondary sources which
allowed me to realize the theoretical part of this thesis. They have been very helpful in
understanding the theoretical context of an innovation and startup ecosystem, while providing me
with very valuable information about both Silicon Valley and Bangalore.
Primary sources
I decided to conduct a series of interviews to enrich the content of my work. Therefore, I selected
and contacted several Swiss, American and Indian experts in entrepreneurship and innovation, to
whom I asked a series of questions via skype or email, in order to deepen or confirm the
information gathered through sources. I dedicated a specific section under the name Comparative
Analysis between Silicon Valley and Bangalore, where I sorted out the most insightful comments
those experts shared with me. An interviewing guide and the profiles of the interviewees are
available in the appendix, as well.
1.2.2. Analysis Tools
Six-Factor Ecosystem Scorecard
A group of researchers from the University of Pennsylvania in United Stated identified six critical
groups, which they consider essential to the success of innovation ecosystems:
1. High impact entrepreneurs
2. Community & culture
3. Government & regulation
4. Universities & education
5. Incubators & accelerators
6. Funding & capital sources
9
Value Proposition Canvas1
The value proposition canvas was developed out of the Business Model Canvas by Dr. Alexander
Osterwalder and Prof. Dr. Yves Pigneur from HEC Lausanne in their book named Business Model
Generation which was published in 2010 and encountered a huge success in academia and in
industry. Another book released in 2014 under the name of Value Proposition Design enlightened
more on its principles and its managerial usage. The value proposition canvas aims at explaining
through 6 “blocks” how to design, test, create and manage compelling products and services where
the value propositions meet the customer needs and requirements:
1. Customer jobs describe the tasks the customers are trying to get done and the purpose they
are looking for (functional, social, personal/emotional or supporting)
2. Customer pains describes undesired outcomes, obstacles and risks which prevent the
customers to get a job done
3. Customer gains describe the required, expected, desired and unexpected gains the customers
are seeking from the value proposition of the product & services.
4. Products and Services decribe the type of offer (physical/tangible, intangible, digital and
financial) the value proposition is built around
5. Pain relievers decribe how the products and services alleviate the customer pains
6. Gain creators describe how the products and services create customer gains
The value proposition canvas can be decomposed into two parts: the right part is related to the
customer segment profile (customer jobs, customer pains and customer gains) and the left part is
related to the value proposition map (products & services, pain relievers and pain creators). More
explicitly, the right part represents the characteristics of a specific customer segment, while the left
part shows the benefits to get designed for fitting the value proposition and the customer segment.
Figure 1 - Value Proposition Canvas (Osterwalder, 2012)
1 http://businessmodelalchemist.com/blog/2012/08/achieve-product-market-fit-with-our-brand-new-value-
proposition-designer.html
10
Figure 2 - SWOT (Team FME, 2009, p. 6)
SWOT
The SWOT enables to compare both innovation ecosystems I previously descibed and individually
evaluated, in order to understand the underlying reasons of their differences. To facilitate this
process, I will first use the SWOT analysis, which serves as an analysis tool to classify, as its
acronym indicates, the strengths (S), the weaknesses (W), the opportunities (O) and the threats (T)
that each innovation ecosystem entails:
Strengths: internal factors that enable the innovation ecosystem to be successful
Weaknesses: internal factors than hinder the innovation ecosystem to be successful.
Opportunities: external factors the innovation ecosystem can capitalize on to be successful
Threats: external factors the innovation ecosystem should mitigate to be successful.
The principle is to depict each of the startup ecosystems previously described, in order to see how
their respective configuration of resources and competences allows them or not to take advantage of
their environment (Johnson and al, 2009, cited by Team FME, 2013, p. 4).
This tool will be used in the section where both innovation ecosystems, Silicon Valley and
Bangalore, will be independently depicted and evaluated.
11
1.3 Limitations
In this work, I decided to exclusively focus on the innovation related to startup ecosystems.
Therefore, I excluded from my research other topics that are also related to and have a significant
impact on innovation such as industrial innovation, research and development management,
leadership management, etc.
Moreover, even though the purpose of this work is to speak about innovation, entrepreneurship and
ecosystems, I keep my focus only on startups. Therefore I do not study for instance the impact of
multinational corporations (MNCs) to an innovation ecosystem. It is the reason why I generally
refer to the term “startup ecosystem”.
Last and not least, I did not achieve a thorough analysis of each stakeholder’s actor of both startup
ecosystems for the simple reason as the purpose of this Master’s degree internship thesis was to
make an overview of both startup ecosystems while comparing them with each other rather than
making a micro focus on each of them without being able to draw interesting comparison points at
the end.
12
2. Innovation and Startup Ecosystem
2.1 What do innovation, entrepreneurship and startup really mean?
2.1.1 Innovation
The term innovation can be defined in different ways according to different perspectives. The
etymology of the word comes from the Latin word “innovare” which means to renew or change.2
The Oxford English Dictionary defines innovation as “the action or process of innovating, [or] a
new method, idea, or product” (Stevenson, A. and Soanes C., 2010).
While asking my interviewees about their own definition of this word, the following expressions
caught my attention:
- Innovation is something which has never been done before. Or you do it in a very different
way which nobody else talks about. (Prateek Khare, personal communication, June 4, 2015)
- The process of converting money into knowledge is R&D, while the process of converting
knowledge into money is innovation. […] Innovation is sticky and really scalable when it is
financially available; that is just because the economic model that sort of succeeded the
most last hundred years has been capitalism (Sartaj Anand, personal communication, June
10, 2015)
- Innovation must be measured in product cycle times (faster and faster releases and entire
product replacement generations), market validation in financial terms (if no one buys it or
pays for it, then we're probably using vanity metrics) and replacement trends (VCR replaced
by DVR replace by streaming video…). (Rich Mironov, personal communication, June 7,
2015)
- Innovation means doing things in a different way. Applying existing concepts in a non-
existent scenario is the essence of Innovation. (Suhas Gurumurthy, personal communication,
June 15, 2015)
- The introduction of a new product or a process that solves a need; the real question is what
is the need (or why innovate). (Tej Pochiraju, personal communication, June 24, 2015)
- Innovation is using technology to solve a problem in a unique and different way, which may
sound counter intuitive at first, but has a sustainable and long lasting scalable effect in the
2 https://experiencinginformation.wordpress.com/2012/06/03/clarifying-innovation-four-zones-of-innovation/
13
long run. […] For example Uber pioneered the concept of hailing cabs using smartphones
and though people may have been skeptical about it initially, the world has now adopted it.
(Harshith Mallya, personal communication, June 17, 2015)
- The commercialization (or use by society) of invention, of something new. (Hervé Lebret,
personal communication, June 1, 2015)
- It’s quite a broad concept that can change depending on the cultural, social and economic
context. The most basic definition of innovation is implementing a new idea. The idea can
be a new solution to an old problem, a new solution to a new problem or developing
something that doesn’t solve any problem, but simplifies human life. (Mauktik Kulkarni,
personal communication, June 14, 2015)
From a business point of view, innovation can be defined as a new or improved idea, designed as a
process, a product or a service, which can get translated into an outcome in the form of a business
opportunity as long as it creates value and impact (financial, social and/or environmental) to the
market segment it targets and/or to the functioning of the innovative organization itself. It is
generally if we can take advantage of the opportunity, that is whether a cost saving or an increase in
revenues is unlocked, that we can speak about innovation. (Drucker, 1985; O'Sullivan and Dooley,
2009; Krishnan, 2010; Bessant and Tidd, 2011; Dabholkar and Rishikesha, 2013)
Therefore, the condition for a sustainable business requires generating enough economic value
which exceeds the cost of capital. In our competitive and globalized world market, there are
basically two strategies businesses can opt for: cost advantage or quality differentiation. Innovation
driven by cost advantage requires economies of scale in order to gain efficiency in the business
processes to deliver value with less cost. On the opposite, innovation driven by quality
differentiation aims to understand user needs and desires by creating higher value for customers
who will subsequently be willing to pay more for. Innovation can also be both driven by cost
advantage and quality differentiation, but such a strategy can be dangerous since the risk of being
stuck in the middle is then bigger: efficiency in both of the strategies is far harder to reach and
demands considerable know-how and resources for a business.
Rishikesha T. Krishnan, Professor of Corporate Strategy at the Indian Institute of Science in
Bangalore, identified two key dimensions of innovation: novelty and utility (Krishnan, 2010),
which can result in many other dimensions I am going to explain in the coming sub-sections.
14
The concept of novelty
The concept of novelty is applicable whenever an innovation is new to (a country, an industry or a
company) and whenever a type of innovation takes place (non-static process). An innovation can be
local instead of being global (local, global or glocal innovation), it can be of diverse nature
(incremental innovation, disruptive innovation, breakthrough innovation or radical innovation) and
it can be of different forms (technological innovation, organizational innovation or business model
innovation).
First, the world is becoming much flatter than it has ever been with the various parts of the world
being more connected than they have ever been. In that sense, glocalization or hybridization
represents the ongoing blending of cultures. If the world is interconnected and interdependent in
many parts, the local conditions however play a key driver in global trades, because individual
needs and requirements are not flat at all; they are as much round as the Earth really is. We can cite
here the example of McDonald’s, which locally adapted its corporate strategy when going global by
customizing the menus to satisfy the local demand of consumers, while keeping global standards
like the French fries, the burger’s concept, the “happy meals” menu for the children and others
(George Ritzer and Atalay, 2010). In India, McDonald’s has been for instance brilliant enough to
bring Indian street food to its table. The Aloo Tikki Burger (burger with a cutlet made of mashed
potatoes, peas and flavored with Indian spices) exemplifies this success because of its very
affordable price and its street food taste, which mutually increase its perceived value for the Indian
consumer3
Secondly, the way of setting up the system (technology protection or technology progress versus
market protection versus market progress) will define which type of innovation will be fostered
(Shavinina, 2003; Kalbach, 2012; Shelton and Percival, 2013). Jim Kalbach, user experience
designer and information architect focusing on innovation and strategy, proposed the following
view of innovation which has been influenced by a model developed by Wheelright and Clark
(1992)4:
1. Incremental or continuous innovation brings relatively small and low-risked changes in
performance and utility to a product, a service or a process in order to improve and protect
its commercial success over time in an existing market that is currently served. It happens
3 http://www.bbc.com/news/business-30115555
4 https://experiencinginformation.wordpress.com/2012/06/03/clarifying-innovation-four-zones-of-innovation/
15
relatively often, especially for the existing companies which generally look for sustaining
innovation, since it is based on their existing knowledge and resources which it constantly
improves thanks to their know-how. Incremental innovation results into new product
features, extensions, variants, service improvements and cost reductions; e.g. I-Phone series,
Microsoft Office Software, Google Chrome extensions, etc.5
2. Disruptive innovation, originating from The Innovator's Dilemma (Christensen, 1997), is
opposed by Clayton M. Christensen, Harvard Professor and businessman, to sustaining
innovation like incremental and breakthrough innovations, which do not create new markets
but rather only sustains and enhances existing ones6. Disruptive innovation is generally
initiated by newcomers since it consists to adopt a very different and new business model,
which enables to address a market which was not yet addressed; either being underserved or
unserved (Christensen, 1997). Disruptive innovation follows a learning curve where it
initially gives inferior performance to existing customers of a mature market and then
improves the quality step-by-step while retaining a competitive advantage over the existing
products or services of the market. It is a market/business innovation and therefore it is
based either on existing technological innovations (e.g. microfinance) or new technological
innovations (e.g. online education like MOOCs). 7,8
3. Breakthrough innovation brings a technologically advanced product, service or process into
an existing market well ahead of competitors. It changes from traditional business models
and creates a greater and higher-risked sustaining competitive advantage than incremental
innovation. This is because it offers something substantially new that people did not think it
was possible or because it satisfies previously undiscovered needs and requirements of the
existing customers; e.g. The Xerox 9700 Electronic Printing System was the first
xerographic laser printer product to be released within the existing printer market, then
dominated by line printers, and “[…] pioneered in laser scanning optics, character
generation electronics, and page-formatting software […]”9.
4. Game-changing innovation has an unconventional impact on the market and on the society
by pushing the barrier of knowledge and driving the performance frontier with a change of
technology. Therefore, it happens relatively rarely contrary to incremental innovation since
it requires highly improved capabilities and higher risks. Game-changing innovation
5 http://www.innosupport.net/index.php?id=6054
6 http://mattwest.io/sustaining-vs-disruptive-innovation/
7 http://www.ribbonfarm.com/2007/07/23/disruptive-versus-radical-innovations/
8 http://jugaadtoinnovation.blogspot.in/2012/08/disruptive-radical-innovation-how-are.html
9 http://inventors.about.com/library/inventors/blcomputer_printers.htm
16
transforms and induces a major shift of the market since new product categories, new
businesses and new industries emerge or existing values-based industries are radically
transformed; e.g. smart watches, 3D printers, edible food packaging, laser-guided bullet,
commercial space flights, lab grown beef, etc. 10,11,12
Gary Hamel, an American management expert, pointed out the accelerating pace of change in
today’s world that are driven by the incessant search for new sources of profit. The markets across
the globe are getting more volatile because of a faster and more intense innovative worldwide pace
and also because of a better access for customers to information and knowledge. The results are
faster innovation and consumerist moves and more frequent innovation and customer behavior
changes towards radical innovations in existing markets or new markets13
. The phenomenon of
accelerating pace of change in turn accelerates what Joseph Schumpeter, economist and former
Minister for Finance in the Austrian government, called “creative destruction”. This latter is a
repeated cycle where one innovation emerges and creates a situation of monopoly, before getting
imitated by other entrepreneurs spamming out other innovations around and creating a situation of
concurrency within the market segment until a next innovation comes up, destroy in a certain sense
the old rules of the game for creating new ones. (Bessant and Tidd, 2011, Kindle Locations 662-
667)
10
http://www.innosupport.net/index.php?id=6054 11
http://www.businessinsider.com/30-game-changing-innovations-2012-8?IR=T 12
http://jugaadtoinnovation.blogspot.in/2012/08/disruptive-radical-innovation-how-are.html 13
https://www.cloudave.com/1129/the-four-quadrants-of-innovation-disruptive-vs-incremental/
Figure 4 - The natures of innovation
(Kalbach, 2012) Figure 3 – Technology progress versus market impact (Carpenter, 2009)
17
Third and finally, an innovation can be of different forms. We can speak about technological
innovation, organizational innovation or innovation based on the business model:
1. As Professor Krishnan points out (Krishnan, 2010), technological innovation has been the
most prominent form of innovation in the last century such as the internal combustion
engine, the microprocessors, the mobile technology, internet with the great development of
the e-services, and many others yet.
2. He also supports that organizational, administrative or managerial innovations like lean
manufacturing, total quality management, outsourcing, supply chain management and
intercorporate industrial partnerships have been as much important as technological
innovations. They have played a key role in the evolution of the practices, processes,
activities and structures over time; e.g. the evolution of raising capital and sharing risks
(joint-stock system, private limited system, cooperative system, corporation system,
partnership system, proprietorship system and more recently crowdfunding system).
3. Finally, Professor Krishnan mentions the innovation based on the business model in the
sense the innovation comes across the value chain, that is how a business generates value for
its customers and how a business captures value from the business model innovation; e.g.
Uber, an American international transportation network company, provides a mobile app for
potential customers to submit a ride request; its business model innovation is certainly
upsetting the traditional business model of the taxi driving companies.
The concept of utility
The concept of utility determines the reasons that influence customers to adopt and use innovations.
It can be translated into five characteristics, which Victor Yocco, researcher and strategist at
Intuitive Company, defined as follows14
:
1. Relative advantage: This is how potential customers perceive a product, a service or a
process improves their current situation alternatives or a previous generation of a product,
service or process. Here, it is very important for a business to undertake a market research in
order to test and validate hypothesis.
2. Compatibility: This is how potential customers consider the innovation compatible with
their lifestyle. Better the compatibility is, higher is the chance for the innovation to be
adopted. Here, the designers need to understand the conditions of adoption, which the design
14
http://www.smashingmagazine.com/2015/01/29/five-characteristics-of-innovations/
18
of the innovation should take into account and align with: beliefs, attitudes, values and
behaviors.
3. Complexity vs. Simplicity: This is how intuitive it is for potential adopters to learn how to
use the innovation. Less complex the innovation, higher is the chance for the innovation to
be adopted. Here, usability testing practices should be applied by the designers through
iterations of the design, in order to address workflows that potential customers have
struggled with and come up to the market with a design as simple and functional as possible.
4. Trialability: This is how easily the potential customers can explore the innovation and get
used to and satisfied with its functionalities. Easier the innovation is to try out, higher is the
chance for the innovation to be adopted. Here, it is necessary for designers to use the trial
version of an innovation as a consistent representation of the experience that potential
customers could get out of it.
5. Observability: This is how visible the outcomes of using the innovation to potential
customers are. More there are early-adopters who use an innovation and make its outcome
visible to potential later adopters, higher is the chance for the innovation to be adopted.
Here, there are several ways of increasing the observability of an innovation for designers:
side-by-side comparison, before and after comparison and testimonials.
2.1.2 Entrepreneurship
Entrepreneurship can be considered as a practice since it defines the willingness or the motive
power of people within a team supported by a network to drive an innovation from scratch to
motion by taking risks. Entrepreneurs are visionaries, passionate, innovators, managers, decision-
makers, opportunity-seekers and risk-takers before being businessmen. They look for business
opportunities by driving innovation to create social and commercial value in developing a strategic
advantage (Drucker, 1985; Bessant and Tidd, 2011; Hwang and Horowitt, 2012).
By allegory, we can say that entrepreneurship and innovation can be respectively seen as vehicle
and fuel. Peter Drucker, Management consultant, educator and author, explained the relationship
between innovation and entrepreneurship as follows: “Innovation is the specific tool of
entrepreneurs, the means by which they exploit change as an opportunity for a different business or
service. It is capable of being presented as a discipline, capable of being learned, capable of being
practised.” (Drucker, 1985; cited by Bessant and Tidd, 2011, Kindle Locations 652-654) In
economics, the relative importance of innovation and entrepreneurship among other components
19
like labor, capital and natural resources for generating profit and growth is well known. It is also a
reason why many countries today, which are under economic crisis and/or simply want to generate
jobs, try to support innovation and entrepreneurship with dedicated public programs and/or funds.15
Since entrepreneurship is a practice with general principles and rules applicable to a large part of
human activities and organizations, there results a discipline called “entrepreneurial management”.
This latter applies either to an existing institution or an individual starting to run a new venture16
(structure), either to a business or a nonbusiness organization (purpose), and either to a
governmental or a nongovernmental institution (sector), even though they all have different needs,
constraints and learning curves (Drucker, 1985). Therefore, we can state that entrepreneurship does
not only refer to one category of people or organizations, but instead includes many of them
(Drucker, 1985; Bessant and Tidd, 2011; WEF, 2014), like for instance:
The low impact entrepreneur: They are individuals who merely want to bring something into
the market while taking limited risks.
The high impact entrepreneurs: They are individuals who have big dreams, generally take
high risks and have in return huge potential for growth and success, and hence are likely to
influence others.
The social entrepreneurs: They are entrepreneurs with social and/or environmental goals as
primary passion for change while considering profitability to a lesser extent.
The serial entrepreneurs: They are entrepreneurs who start many different businesses and
therefore get a better understanding of how to be successful thanks to long-term capabilities.
The “intrapreneurs”: They are internal entrepreneurs of existing companies, which want to
renew and evolve their products, services or processes.
The notion of risk-taking is a very important ingredient of any entrepreneurial venture. It is
particularly true for the four first above-mentioned categories, but it is false for the “intrapreneurs”
since they avoid part of the financial risks their existing company carries in their favor. Risks
should not be drivers for resignation but rather be considered as necessary obstacles that any
entrepreneur must overcome to succeed. Any entrepreneur should have the ability to take risks in
counterparties of very positive payoffs if successful or very negative payoffs if unsuccessful (risk-
return trade-off). Peter Drucker (1985) underlines that successful entrepreneurs learn how to get
adequate and minimized risks. Therefore, being a successful entrepreneur is not about taking
unnecessary risks that make no-sense, but rather about behaving and managing with a methodology
15
http://www.businessdictionary.com/definition/entrepreneurship.html#ixzz3cBLkCWay 16
A business enterprise involving some risk in expectation of gain.(cited from Thefreedictionary)
20
based on purposeful innovation (Drucker, 1985; Bannerjee, Banerjee and Sastry, 2014). Sreekanth
Ravi, serial entrepreneur and founder of Tely Lab - video-conferencing company, identified
different types of entrepreneurial risks, which if are identified and approached early enough will be
less negative on the chance for success of the entrepreneurs17,18
:
Product/service and market risks
The entrepreneurs need to decide what they want to offer to the market, who they want to target and
how they want to address them, while understanding why, who and how potential customers or
customer segment would like to buy their product/service. It is in that sense a predictable risk
entrepreneurs are responsible for. Therefore, they have to clearly design using physical, intellectual,
human and financial resources about what the product or the service is and offers as value
propositions, and particularly need to match the value propositions with the customer segment they
would like to target. It is pretty hard for entrepreneurs to perfectly estimate the popular interest
towards a product or service, since people are unpredictable by human nature and there is always a
risk of overestimating a potential market.
It is the reason why the entrepreneurs should use the lean startup methodology, in order to alleviate
the risk of missing out their target with an inadequate product or service. For instance, the lean
startup methodology proposes to draw hypothesis and then test them on potential customers, but
also to pivot a prototype of the product or service again and again for matching the needs and
requirements of the customer segment at best. There are two important tools called the Business
Model Canvas and the Value Proposition Canvas, which help the entrepreneurs to realize a fit
between their value proposition and the market segment. The Business Model Canvas will
especially help to understand how a business model generates and provides value to customer,
while the Value Proposition Canvas will identify how the value proposition of the product or
service can alleviate the pains of the customer segment while creating gains. Better the fit between
the value position and the customer segment is, lower are the product/service and market risks.
(Osterwalder, Pigneur, Bernarda and Smith, 2014)
17
http://www.entrepreneur.com/article/234094 18
http://www.entrepreneur.com/article/238319
21
Financial risks
Becoming an entrepreneur and starting a venture can be a difficult choice to make for those who are
already employed and are following a corporate career path. Even though, there is a backup plan for
many in the sense they can still resume their career in case of failure in their entrepreneur job. There
is indeed no guarantee of success and income at the beginning. This can be overwhelming for not
experienced and prepared people. However, this is also the reason why entrepreneurship makes the
entrepreneurs immensely motivated to succeed in their venture: It is a “do-or-die mission”19
.
Moreover, depending on the financial needs of the entrepreneurs, it can be possible to be only
dependent from external funding: angel investor contributions, venture capitalist investments,
government financial support (grants and loans), personal loans, award-winning grants and
crowdfunding sources like Kickstarter. However, most of the cases, entrepreneurs have to withdraw
cash from their personal savings to get the things moving forward, at the expense of losing their
safety net.
Furthermore, cash flow is a struggling issue that many entrepreneurs face at the early stage of their
business. It is primary for them to regularly have higher ingoing cash flows than outgoing cash
flows, in order to support day-to-day expenses at its best.
Last and not least, deadlines and timelines are very important for a venture when considering
product launches and milestones within the context of financial risks. They are often subject to
change as entrepreneurs deal with multiple goals. Therefore, it is primary to prioritize the key
business milestones, in order to achieve them successfully on time and nurture the confidence of the
investors.
Team risks
For any young entrepreneur, the key to success is the team and its network. It is necessary to
leverage on the skills of everyone since no one has all the answers. Nevertheless, a young venture
will never have a lot of employees. Thus, it is primary to cherish, valorize and trust the few key
people to be hired. There are two main reasons behind this assertion:
19
http://www.entrepreneurship.org/resource-center/risk-in-entrepreneurship.aspx
22
1. If the team members have high-skilled profiles, they could be tempted to opt for a career and
higher salary in the industry instead. Therefore, the venture needs to trust those people and
to give them a maximum of autonomy, flexibility and responsibility, in order to primarily
compensate more or less the disadvantages of working for a venture and then to fully
develop their skills and potential.20
Yet, shares of equity can be dedicated to members of the
team – option pool (Market Revolution, 2014).
2. Moreover, entrepreneurs absolutely need to trust those key people to lead their task to
completion on time especially within the context of a venture which depends on its first
released product or service and where the timeline is also crucial to respect with regard to
financial risks. Therefore, it is very important here to trust the key people in a team who
inspire and invoke confidence as they are good enough to get the venture across the
milestones.
Execution risks
While it is dangerous for entrepreneurs to focus too much on details, it is also non-recommended to
overlook crucial details by keeping solely an overall look on the strategy and the execution. A right
balance lies between micro-management and macro-management.21
Moreover, during the execution, there are risks that can be controlled and minimized, but others that
cannot. Market analysis, consulting and auditing can help to evaluate and mitigate risks, as long as
there are more than only one actor to impact the decision-making process at the end.
Finally, entrepreneurship is a restless activity that requires personal sacrifices from entrepreneurs
wanting to reach up to the desired level of success. It can then engenders regular stress, delays and
intense pressure for the entrepreneurs, resulting from other entrepreneurial risks (product risk,
market acceptance, capital dependency, available cash flows, timelines to respect and team risk).
20
http://www.entrepreneurial-insights.com/hr-reality-check-working-startup-vs-corporate-job/ 21
http://www.sapience.net/blog/work-efficiency/169-345-micro-management-versus-macro-management-for-managers
23
2.1.3 Startup
A startup is a venture since it has quite an independent environment under conditions of uncertainty,
where entrepreneurs exploit a new and scalable technology or a market opportunity with external
financing. It serves as starting point for transforming an entrepreneurial idea into a marketable
product, services or process, and for evolving a team into a company22
.
We can refer to startup as a structure which helps to manage innovation and entrepreneurship,
which Richard Branson, world famous entrepreneur and CEO of Pepsi Co., defined as follows: “An
innovative business is one which lives and breathes ‘out of the box’. It is not a singular single good
idea; it is a combination of good ideas, motivated staff and an instinctive understanding of what
your customer wants.” (Branson, DTI Innovation lecture, 1998; cited by Bessant and Tidd, 2011,
Kindle Locations 822-82)
Hervé Lebret, Professor of entrepreneurship and innovation at the Swiss Federal Institute of
Technology in Lausanne (EPFL), provided a very insightful definition of startup in 2013 by
highlighting the key criteria which personifies its purpose as23
:
A start-up is a corporation which explores, which is looking for a business model, a market,
customers and is trying to innovate. It usually looks for a big market (“scalable”) and
therefore service businesses do not qualify (except on the web) as they do not often scale. It
is also a matter of strong and rapid growth in emerging markets because the competition is
tough and there will be few winners. It often go fast. That is why it is more about a mindset:
you are curious, in an uncertain world, trying to bring new things to the world. Because you
are looking for a business, you do not have enough paying customers, and you will most
likely need external capital (business angels, venture capital) except if your future
customers accept to pay a lot in advance. This is why there is a strong correlation between
being a start-up and having investors. (Lebret, 2013)
There are basically five main stages of development in a startup’s life cycle, which require from the
starting up different milestones and are correlated to different rounds of venture funding, where
each time the startup “[…] take just enough money to reach the speed where [it] can shift into the
next gear.” (Graham, 2005; cited by Market Revolution, 2014) The concepts have been normalized
22
http://www.startupcommons.org/startup-key-stages.html 23
http://www.startup-book.com/2013/01/08/whats-a-start-up-and-a-spin-off/
24
over a business's life cycle, in order to vulgarize the funding stages as much as possible and sources
of the startup over a time. It is however important to point out that venture investment amounts in
one startup ecosystem may on average look more like early stage investment amounts in others
(Lauder Institute Global Knowledge Lab, 2012).
Below are the venture phases and funding:
STAGE ACTIVITY, DURATION, %EQUITY FUNDED FUNDING AGENT ADVANTAGES/DISADVANTAGES
1 - Pro-seed Ideation: company set up, prototyping
(business model and value
proposition)and living expenses
Timing : 3 months
Funding : 5% equity ($15'000)
Friends and family
Pros : easy to find
Cons: personal relations involved
in business risk, no business
network
Grants and competition
Pros : money, gain visibility, few
constraints
Cons: no business network
Crowdfunding24
Pros: awareness, recognition, fast
funding process, complex and
niche projects get funded, no
constraints
Cons: no business network and
percentage of successful projects
crowdfunded decreases,
crowdfunded information is
asymmetric compared to what
business angels and VC obtain in
diligence, no need to convince
investors decreases feedbacks
2 - Seed Concepting and commitment : first
run to build the company goal and
team (shareholder agreement) with a
Minimum Valuable Product (MVP) and
a business plan (market size, revenue
model, competitors, competitive
advantage)
Timing : 3-6 months
Funding : 5-30% equity ($15’000-
100'000)
Incubators/accelerators
(for people): offer
funding, working spaces,
business and technical
mentorship, supporting
services (consultants,
lawyers, accountants,
etc.), networking
Pros: low control over the startup,
easy to reach, standardized
investment process, personal
relationship, access to VC network
Cons: small funding, strong
competition, lower commitment
Crowdfunding Idem
3 - Early stage Market validation: generate traction,
generate revenue and hire additional
staff
Timing: 12-18 months
Funding : 15-20% equity up to 2m
Angel investors (for
market captivity): rich
and generally
experienced people who
invest
in high growth startups
Pros: networking, mentoring, less
investment constraints
Cons: push to exit, less reputation
to protect, involved in the
management
24
http://www.gsb.stanford.edu/ces/crowdfunding-101
25
Crowdfunding Idem
4 - A-B-C
rounds
Scale: grow from revenue to profit
(outsourcing and automation to
increase productivity), hire executives
and go international
Timing: 1-2 years
Funding : 10-40% equity > 2mio
Venture capitalists (for
exit - cash-out with a
strong multiplier 2-3x):
investors managing
equity stakes of high-
risk/high-return ventures
Pros: capital, experience, network
Cons: control on the management,
strict, regulation on investment
Crowdfunding Idem
5 - Later stage Establishing: get bought (acquisition),
go public (IPO) or grow funding
(external investments of large
companies)
Timing: 3-4 years
Acquisition25
pros: adding value to the
combined entity, additional
distribution channels to leverage
on, facilited acquisition of
technology and talent
cons: clash between the corporate
cultures
IPO26
pros: improved financial condition,
incentive compensation to
employees, stock can be used for
company purchases, increased
recognition and visibility
cons: Loss of control (need
shareholders’ approval for some
matters), financial statements to
be audited on a regular basis,
sensitive information to be
revealed on a regular basis
Investments from large
companies27
pros: large amounts of funding,
active external involvement in the
running of the business
cons: dilution/loss of ownership
stake and management control
Figure 5 - Venture phases and funding (Lünendonk, 2013; Market Revolution, 2014)
25
http://www.thehartford.com/business-playbook/in-depth/business-acquisition-pros-cons 26
http://smallbusiness.findlaw.com/business-finances/pros-and-cons-going-public.html 27
http://business.tutsplus.com/tutorials/the-pros-and-cons-of-having-private-equity-firms-invest-in-your-business--cms-19887
26
2.2 What is a startup ecosystem about?
2.2.1 Introduction
“Ecosystem” originates from the merging of the words “eco” and “system”. The former stands for
the relations between living things in a specific environment, while the latter refers to organization
(Durst and Putanen, 2013). The analogy between ecology and management has often been used to
study how community environments: compete and/or cooperate with each other.
Using a kind of biological analogy, the innovation ecosystem can be associated to the so-called
“Rainforest culture”, which “[…] is a human ecosystem in which human creativity, business
acumen, scientific discovery, investment capital, and other elements come together in a specific
recipe that nurtures budding ideas so they can grow into flourishing and sustainable enterprises.”
(Hwang and Horowitt, 2012, p. 28) Therefore, as Mercan and Göktas mention (Mercan and Göktas,
2011, p. 102; cited by Durst and Putanen, 2013, p. 3), innovation ecosystems are the result of the
mixing of economic and non-economic agents (technology, education, culture and society). Further,
Judy Estrin, Internet pioneer and American business executive, explains that “innovation
ecosystems are made up of communities of people with different types of expertise and skill sets”
(Estrin, 2009, p. 37–38; cited by Durst and Putanen, 2013, p. 5). Her theory states that innovation
can only thrive within an ecosystem if there is “[…] a constant and balanced cross-pollination of
ideas, questions, knowledge and technology between the most important communities [which] must
receive “nutrients” through different supportive structures, such as leadership, funding, policy,
education, and culture.” (Durst and Putanen, 2013, p. 5)
Ron Adner, Professor of strategy at the Tuck School, defines more simply an innovation ecosystem
as “the collaborative arrangements through which firms combine their individual offerings into a
coherent, customer-facing solution” (Adner, 2006, p. 98; cited by Durst and Putanen, 2013, p. 3).
He claims that innovations rarely emerges in isolation with single actors, but rather in open
innovation, where there is a large basis of interacting and dependent actors coming up with
complementary innovations creating value for everyone (2006; cited by Durst and Putanen, 2013, p.
4). Open innovation encompasses both internal and external actors of an organization, which act as
co-innovators along the innovation process. Indeed, the multi-varied types of knowledge and
expertise of the actors nurture the innovation process and facilitate the marketization for its
commercial use (Chesbrough 2003; cited by Durst and Putanen, 2013, p. 3). We can also speak
27
about “innovations communities”, which according to Professor Ping Wang are “a set of
organizations and people with interests in producing and/or using a specific innovation” (Wang
2009, p. 8; cited by Durst and Putanen, 2013, p. 4). According to Professor Wang, those
communities are dependent on each other in the sense that they emerge and evolve around
“orchestrating activities” by following a collective innovation movement (Durst and Putanen, 2013,
p. 4). Rubens et al. talks about “creation nets” that provide (Rubens et al., 2011, p. 1743; cited by
Durst and Putanen, 2013, p. 4):
(a) goal-focused creation of new goods and services tailored to rapidly evolving market needs,
(b) with multiple institutions and dispersed individuals,
(c) for parallel innovation.
Last and not least, the concept of innovation within an organic system like a startup ecosystem can
be decomposed into three systematic derivatives regarding the way the stakeholders interact with
each other (Hwang and Horowitt, 2012):
1. The advisors of innovators (one-to-one relationship): One advisor mentors and advises one
innovator at a specific time for a specific matter (e.g. coaches, advisors, consultants,
investors, accountants, etc.).
2. The groups of advisors and innovators (many-to-one relationship): Their role is to build up
scalable, efficient and wide-skilled networks of mentors (e.g. incubators, accelerators, etc.),
in order to support the innovators on the early phase of the value creation.
3. The systems of groups, advisors, and innovators (many-to-many relationship): This type of
relationship facilitates the partnerships between the different communities within the
ecosystem, which become self-sustaining and where human culture is transformed into a
many-to-many system (e.g. crowdfunding like Kickstarter, open innovation platforms, etc.).
2.2.2 What are the different stakeholders of a startup ecosystem?
A startup ecosystem does not manifest overnight. The interactions of a community of agents are
necessary to facilitate its emergence and functioning. Subsequently, the ecosystem enables to
answer the requirements of entrepreneurs because they are supported by the adequate partners,
which benefit from the innovators with regard to their own profit or non-profit purpose, to fulfill
their needs. A group of researchers from the University of Pennsylvania in United Stated identified
six critical groups, which they consider essential to the success of innovation ecosystems (Lauder
Institute Global Knowledge Lab, 2012):
28
High impact entrepreneurs
High impact entrepreneurs are pioneering entrepreneurs who start from scratch a business resulting
from their imagination with the intent to create new products/services, new markets, to disrupt
incumbents and contribute to improve the standard of living in the region through their innovation.
They are highly motivated and passionate, have no fear to fail and want to break the status quo.
(World Economic Forum, 2014)
Community & culture
Passionate entrepreneurs within a same ecosystem can build trusted and informal networks for
mutual purposes: sharing and learning knowledge and information, research and collaboration,
partnerships and business. Visionary and very engaged entrepreneurs are generally those who
facilitate the meet-ups and events and participate to spread awareness through media inside and
outside the startup ecosystem, in order to attract local and global talent, investors and entrepreneurs.
Government & regulation
Governments are policy makers and regulators at the same time. They should encourage innovation
by alleviating the barriers to entrepreneurship and investment. They play a key role in pulling
together the conditions necessary for a “[…] stable, predictable, and supportive regulatory
environment for entrepreneurs and investors.” (UP Global, 2014, p. 4) The architecture of the
regulatory environment designed by the government “[…] can have a significant influence on how
investors think about the location of innovators and the destination of their investments.” (Erixon,
2013; cited by UP Global, 2014, p. 37) Thus, regulations are needed tools, which should facilitate
the process of entrepreneurship, innovation and investment; e.g. property rights, contract
enforcement, supportive tax policy, protective intellectual property (IP)28
, direct investment for
fostering research, innovation and entrepreneurship, etc.
28
Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce. Types of IP: Copyright, patents, trademarks, industrial designs and geographical indications. (cited from http://www.wipo.int/about-ip/en/)
29
Universities & education
Private and public education institutions serve as important suppliers of talent (engineers, designers
and businesspeople like entrepreneurs, accountants, consultants, lawyers, investors, etc.) to the
startup ecosystem. They also have the potential to bridge the gaps between the academic and the
entrepreneurial worlds. They accommodate research labs where scholars look for radical
innovations, which could be commercialized if technology transfers to startup companies are
operated. It is why nowadays more and more universities have started hosting their own incubators.
Incubators & accelerators
Incubators and accelerators are supportive stakeholders which are designed to foster the growth and
success of startups. These organizations help startups to plug into the startup ecosystem to make
valuable connections and move forward by sidestepping loss of time and failure risks. Even though
both incubators and accelerators offer similar services (office space, mentorship, networking and
early stage support services like internet access, accounting and legal service), they have different
roles to play towards startups and therefore their business models are different. (Lauder Institute
Global Knowledge Lab, 2012)
On one hand, incubators29
provide various types of startups on a rolling basis with a long time and
fee-based services support as well as access to experienced entrepreneurs (Lauder Institute Global
Knowledge Lab, 2012). On the other hand, accelerators give support on a batch basis and over a
short, limited and condensed period of time to mostly high growth potential tech startups “[…]
entering or growing in a national or global market” 30
with the possibility of investments by venture
capitalists in exchange for equity (Lauder Institute Global Knowledge Lab, 2012).
29
http://www.entrepreneur.com/encyclopedia/business-incubator 30
http://blog.theentrepreneursadvisor.com/2011/07/business-incubators-business-accelerators/
30
Below is a table that compares simple business assistance, incubator and accelerator according to
seven key criteria for startups:
Funding & capital sources
There are mainly six ways for startups to seek funding, which can be either private- or public-
sourced and can for some of them, “in addition to capital, [investors] offer relationships, guidance
and services to portfolio companies in an effort to increase valuations and generate returns through
acquisition or IPO” (Lauder Institute Global Knowledge Lab, 2012, p. 9): family and friends,
business angels, incubators (some) and accelerators, venture capitalists, crowdfunding and banks
(loans)31
.
31
http://www.huffingtonpost.com/colleen-debaise/five-sources-of-money-for_b_4032145.html?ir=India&adsSiteOverride=in
Figure 6 – Differences between supportive programs (Crowell, 2013)
31
Below are descriptions of the most popular and specific sources of capital: business angels, venture
capitalists and crowdfunding:
Business angels32,33
: Wealthy and accredited (means having important financial resources)
investor who provides funding to a startup, either on one-time investment or on ongoing
investments usually going from $150,000 to $1.5 million, in exchange for equity. They are
less demanding than venture capitalist regarding the term sheet and also offer support
(expertise, experience and network)
Venture capitalists or firms34
: Risk profile investors who generally “[…] take large equity
positions in exchange for funding and may require representation on the start-up's board.”35
They can earn impressive returns on equity if the startup goes to success. Therefore, their
main focus concerns the viability of the business model and can also provide the startup
with managerial expertise and influence on company decisions.
Crowdfunding36
: Online platform enabling to fund a venture by rising amounts of money
from a large group of people. As a source of capital, it has successfully and increasingly
emerged with the information economy and facilitated the process of aggregation of small
contributions of plenty of individual investors for funding startups (Lauder Institute Global
Knowledge Lab, 2012). Entrepreneurs can use them as a platform to “[…] prove to VCs,
angel investors and banks that there is a demand for a product in the marketplace, removing
some of the risks from the equation“. (Danae Ringelmann, co-founder of Indiegogo; cited by
Forrest, 2014) There are basically four types of crowdfunding: equity based, donation based,
lending based and reward based.37
The advantages of this method are: generation of seed
rounds from non-accredited investors (easier and faster process), no need to offer equity to
the investors and no need of a lead investor (UP Global, 2014, p. 32).
32
http://www.techrepublic.com/article/funding-your-startup-crowdfunding-vs-angel-investment-vs-vc/ 33
http://www.investopedia.com/exam-guide/cfa-level-1/alternative-investments/venture-capital-investing-stages.asp#ixzz3e6j5IidX 34
http://www.investopedia.com/terms/v/venturecapitalist.asp 35
http://www.investopedia.com/exam-guide/cfa-level-1/alternative-investments/venture-capital-investing-stages.asp 36
http://www.techrepublic.com/article/funding-your-startup-crowdfunding-vs-angel-investment-vs-vc/ 37
http://utrconf.com/4-types-of-crowdfunding-and-what-this-means-for-the-future-of-investments/
32
2.2.3 What makes a startup ecosystem successful?38
There are ingredients that create the appropriate conditions for a vibrant startup ecosystem to exist
and attain maturity. These drivers enable evaluating the health of a startup ecosystem over time and
can then be used as dynamic measures. Marc Nager, entrepreneur and CEO at UP Global - non-
profit dedicated to fostering entrepreneurship, grassroots leadership, and strong communities,
shared the research his company conducted about what makes entrepreneurial ecosystems thrive:
talent, density, culture, capital and regulatory environment. I comment the results under this section.
Talent
Talent is an essential driver for innovation and business growth, since entrepreneurs generally look
for the best locations where to go for accessing diverse, experienced and talented people. Therefore,
investing in human capital enables “[…] to build and retain a workforce not only with the skills
startups seek but also to help build businesses and innovate for the future” (UP Global, 2014, p. 7)
Universities and education focusing on IT and innovation should be supported in order to maintain
a considerable high-skilled workforce within a startup ecosystem, which will attract local, regional,
national and global entrepreneurs and in turn will bring innovation and value to existing and new
businesses.
Moreover, creating flexible and dynamic labor markets prevents from missing out diverse and high-
skilled talent. Otherwise, there would be shortages of manpower in some specializations or roles of
course, less competitiveness and more uncertainty for entrepreneurs and investors. Labor policies
should then not be intricate, but they should rather facilitate and stimulate investment flows into the
startup ecosystem. Moreover, global talent and innovators from other countries could be more
attracted to leave their place and contribute to the local economies whether the startup ecosystem
offers interesting opportunities and flexibility to them. It has been proved that immigrants
historically had a very high entrepreneurial spirit (Stangler and Bell-Masterson, 2015). High-skilled
immigration policies should be used for this purpose of facilitation of human capital exchanges.
Carlos Espinal, partner at Seedcamp, confirmed: “One quick way of bridging a shortage in staff in
an area is to create immigration policies that allow for talented and capable individuals to enter the
38
Main source: UP Global, 2014
33
country and its labor force without major hurdles.”39
Thus, it is also necessary to ensure that
employers will no way be penalized for attracting foreign talent with high skills and experience. In
the report of UP Global, it is stated that “[...] attracting foreign talent can support investment in the
local workforce because it creates a virtuous cycle that allows highly skilled workers from other
countries to train local employees.” (UP Global, 2014, p. 9)
Besides, it is important to consider the pace of change, which is evolving very fast in today’s
information and communication economy. The traditional model of employment where most of the
people occupied only one function over their entire professional life and were working full-time is
giving way to more flexible and short-term working arrangements depending on the place.
Therefore, the traditional model of education is evolving as well into “[…] a broader inclusion of
learning opportunities that promote hands-on skills development and can be made available to
anyone who’s interested in learning […] also referred to as “authentic learning” where students
learn by doing.” (UP Global, 2014, p. 10) Companies, schools and governments already
implemented education-based applications that “[…] complement the traditional system, encourage
an entrepreneurial ecosystem, and create a competitive workforce” (UP Global, 2014, p. 10): Short
term and job-specific educational programs like Skillshare, workshops and events like Startup
Weekend, corporate educational programs and platforms dedicated to employees, ICT-based school
programs for team working, STEM education40
, applied apprenticeships and internships, etc.
Finally, it is primary nowadays to promote workplace diversity (gender, race, age, culture, etc.),
which will in turn “[…] encourage[s] different ways of thinking, new products and services to
support a wide range of users, and creative problem-solving techniques.” (UP Global, 2014, p. 13)
It has been for instance proved that startups addressing the gender gap perform better: “[…] with
five or more females, 61 percent were successful and only 39 percent failed.” (UP Global, 2014, p.
13) The cross-pollination of ideas necessary for innovation will subsequently be facilitated (Lauder
Institute Global Knowledge Lab, 2012). Yet, it is important to foster economic diversity, which is
moving up local people with low income quintiles, for expanding opportunities to the local
population, improving their conditions of life and offering prosperity (Stangler and Bell-Masterson,
2015).
39
http://thenextweb.com/entrepreneur/2014/04/01/build-tech-ecosystem-essential-building-blocks-city/?utm_source=social&utm_medium=feed&utm_campaign=profeed# 40
STEM is a curriculum based on the idea of educating students in four specific disciplines — science, technology, engineering and mathematics — in an interdisciplinary and applied approach (Hom, 2014).
34
Density
More talented entrepreneurs have the opportunity to pool their ideas together, higher is the chance
that successful ventures emerge. Proximity of nodes helps to bring people together and develop a
network very fast41
. Business clusters are environments where entrepreneurship can flourish since
they are geographic networks of closely located, interconnected and dynamic businesses, suppliers
and associated organizations active in a specific field. AnnaLee Saxenian, Professor in the
Department of City and Regional Planning at UC Berkeley, explains that “proximity facilitates the
repeated, face-to-face interaction that fosters the mix of competition and collaboration required in
today’s fast-paced technology clusters.” (Saxenian, 1994; cited by UP Global, 2014, p. 16)
Worldwide Clusters growth has been facilitated over the past decades by a “[…] combination of
policies focused on fostering and attracting a skilled talent pool, incentives for investment in
technology-driven businesses, a strong business community support network, and reliable
transportation that facilitates movement to, from, and in a city.” (Blank, 2014; cited by UP Global,
2014, p. 16) Physical hubs or co-working spaces can also help to foster entrepreneurship and
innovation since they enable to gather all the necessary actors of a startup ecosystem within the
context of a limited space. They play the key role of supporting entrepreneurs and providing them
with “training, networking opportunities, access to finance, [...], a home base for the startup
community, and if possible, a free event space for education, demo days, [...], a focal point for
investors, mentors, and others looking to support the startup ecosystem.” (UP Global, 2014, p. 18)
Moreover, media (especially the ones dedicated to entrepreneurship and innovation) is an important
tool for attracting global entrepreneurs, talent and investors. It enables to drive awareness of the
startup ecosystem by sharing news, startup advices, resources, research reports, and by spreading
entrepreneur success stories, which in turn will increase engagement towards entrepreneurship
within the startup ecosystem. The public services can also provide immigrants with online
information about the startup ecosystem's place and administrative steps to follow for working or
launching a business there. The public services can simultaneously inform local employers about
the opportunity of hiring high-skilled and experienced immigrants; e.g.: visa programs (Chatterji,
Glaeser and Kerr, 2014; cited by UP Global, 2014). Workshops, festivals, mentoring and
networking events indirectly help in fostering innovation for entrepreneurs and connecting them to
other stakeholders of the ecosystem who may help them. These are instruments for sharing
information, learning lessons and best practices. They definitely serve to build a stronger
41
http://thenextweb.com/entrepreneur/2014/04/01/build-tech-ecosystem-essential-building-blocks-city/
35
community. Besides, there are also cross-national programs that aim at connecting most of the time
Silicon Valley with emerging startup ecosystems; e.g. The Hindu Entrepreneurs (TiE)
Finally but not least, entrepreneurs need to build their ideas on research which is profusely
produced by universities and other organizations. Therefore, there is a key advantage to leverage on
“[...] strong connections between business and academia [since they] include funds for joint
research, development of standardized licenses to facilitate technology transfer, and coordination of
seed funding for university spin-offs.” (UP Global, 2014, p. 23) Universities can even be the
intermediary for connecting entrepreneurs, mentors and investors together. Many universities
initiated incubators at their campuses42
.
Culture
The development of role models, which are entrepreneurs or startups whose success can be
emulated by other entrepreneurs or startups aspiring to be like them, stimulates the desire for
entrepreneurship and innovation within a startup ecosystem. Here, media and visibility foster the
entrepreneurial spirit and help spreading the best practices across the ecosystem and even beyond. It
however not only talks about success, but also shares with the communities of entrepreneurs a
success story including failures as lessons learned.
The notion of open and risk-taking culture is an important feature which reveals to a certain extent
how opportunity-seekers the entrepreneurs are. It represents the acceptance of failure as “[…] a
necessary part of the innovation process because from failure comes learning, iteration, adaptation,
and the building of new conceptual and physical models through an iterative learning process.”43
Indeed, a study demonstrates that “[...] businesses set up by re-starters actually grow faster than
business set up by first timers in terms of turnover and jobs created” (European Commission, 2011;
cited by UP Global, 2014, p. 27) . However, it takes time to show entrepreneurs that risk-taking
pays off, since building a community of role models, who failed before reaching success, is not an
overnight journey. Media, as explained in the previous section, can help in that sense. Besides,
establishing role models with other startup ecosystems, notably the Silicon Valley, can help the
entrepreneurs of other startup ecosystems to understand more open and risk-taking culture of
innovation.
42
http://thenextweb.com/entrepreneur/2014/04/01/build-tech-ecosystem-essential-building-blocks-city/ 43
http://www.forbes.com/sites/darden/2012/06/20/creating-an-innovation-culture-accepting-failure-is-necessary/
36
Entrepreneur is obviously not the job that young graduates are generally looking for after exiting
University because of the categories of risks I already explained under the section
Entrepreneurship. Universities started to introduce entrepreneurship classes in their curriculum.
They understood the importance to teach students entrepreneurial skills to make them feel less risk
averse and more confident towards becoming entrepreneurs. Governments and community
initiatives also promote jobs for startups, in order to make young graduates consider the impact they
could have as entrepreneurs (UP Global, 2014, p. 29).
Yet, interactions between the private and the public sectors helps to indirectly impact on policy
makers for the private sector by providing a valuable feedback of the reality of the startup
ecosystem and the take actions to get preferably executed by the public sector for supporting
innovation in the best possible way (UP Global, 2014, p. 29).
Capital
Capital is a critical resource for an entrepreneur at whatever stage of the business. The capital
investment sources then play an essential role in nurturing and accompanying the startups along the
different stages of their development and are necessary to thrive a startup ecosystem. It is indeed
considered that “successful venture funds are an indicator of a healthy entrepreneurial ecosystem”
(Lauder Institute Global Knowledge Lab, 2012, p. 9).
Proactive regulation should facilitate the access to capital for entrepreneurs. Providing funding is
however not the end since it does not necessarily guarantee success. Therefore, governments should
design supportive funding structures according to the context and the specificities of the startup
ecosystem (seed capital, early stage capital, etc.).
Besides, tax incentives can attract high-risk appetite investors and in turn unlock business
opportunities within a startup ecosystem. Carlos Espinal, partner at Seedcamp, states that
“ecosystems that have government support to help investors invest more, generally manage to
unlock a stored pool of capital that can be repurposed to help stimulate the economy.” (Espinal,
2014; cited by UP Global, 2014, p. 34) The experienced investors should be more particularly
attracted by the government since they are the most helpful investors to the entrepreneurs by
37
providing them with expertise, experience and advice along the investment stages of a startup.44
Above all, the government should keep attracting investors by encouraging them to reinvest their
gains into the economy of startups by using a tax policy of capital gains tax relief for shares.
Furthermore, other tax incentive programs like “Employee Share Option Plans” can offer tax
advantages for an employee shareholder and then persuade an employee to take more risks into the
venture as well (UP Global, 2014, p. 34).
Regulatory environment
Regulators should primarily focus on easing the creation and closing of ventures by several
measures, in order to alleviate the burdens for investors in regards with the investment environment
and drive innovation and entrepreneurship within a startup ecosystem,:
Putting registration processes online, reducing or eliminating minimum capital
requirements, simplifying post-registration procedures (tax registration, social security
registration, licensing), creating one-stop shops for registration, and reducing bankruptcy
penalties are a good place to start (UP Global, 2014, p. 38)
In the case of failure and bankruptcy, there should be a faster and facilitated process for investors to
exit their liabilities and therefore they would be more likely to take risks again by reinvesting into
other ventures of the startup ecosystem. It is indeed for instance stated by the Organization for
Economic Cooperation and Development (OECD), that “[…] reducing the stringency of bankruptcy
legislation from the highest to the average level in the OECD could raise capital flows to patenting
firms by around 35 percent.” (OECD, 2013; cited by UP Global, 2014, p. 38) It is to bear in mind
that failure is part of success in entrepreneurship, so that the regulatory environment should not
sanction failure too much under penalty of losing investors.
The tax system should be effective enough to drive entrepreneurship and investment within the
startup ecosystem. There are some policies that can be initiated by the government in order to
accomplish this goal (UP Global, 2014, p. 39):
Corporate tax: Competitive corporate taxation attracts companies and in turn fosters R&D
development within the startup ecosystem.
Tax breaks for hiring: Trade-off between cost and value of hiring a new employee is
rebalanced with such incentives.
44
http://thenextweb.com/entrepreneur/2014/04/01/build-tech-ecosystem-essential-building-blocks-city/
38
Tax rebates: Initial investments into startups can be promoted if there is a high-reward fiscal
rebate to gain afterwards.
Capital gain tax relief: Lower capital gain tax rates can be applied by the government to
encourage reinvestments and foster a virtuous circle of investments.
Income tax breaks for entrepreneurs: Promotion of entrepreneurship and startups.
Research and development tax credits: Promotion of innovation by supporting financially
companies investing in research and development.
Tax compliance simplification: Less time-consuming and cumbersome procedures enable
the entrepreneurs to focus more on their core business.
In today’s interconnected world where internet impacts so much on our economy (e-commerce, e-
services, social media , interconnected supply chains, etc.), it is very important for governments to
strike the right balance between keeping internet free and open to global users (with a fast and
reliable internet connection45
) and regulating it. Entrepreneurs take advantage of the opportunities
offered by internet in scaling their business to the world market. Data localization, data processing
costs or even worse, censorship, are burdens which the governments need to bypass if they want to
foster business growth. However, the governments must anyway regulate the web and set rules. It is
necessary firstly for businesses to know they won’t be held morally and legally responsible for the
actions of their users on their web platform and secondly for the actors of the business environment
to be confident enough they can use internet as a trustworthy platform for innovating, investing and
doing business. Copyright, for instance, has to be carefully studied online. Today, it is necessary to
have copyright’s limitations for fostering online innovation and creation by using tools like
YouTube, Google, Facebook, etc. A flexible trade-off between copyright protection and limitation
based on purpose-based standards can help to legitimate uses of copyrighted content. Yet, the
government should also come up with supportive regulations to today’s alternative funding
mechanisms like Kickstarter or Indiegogo, which operate in many different regulatory environments
and use information and communication technologies. (UP Global, 2014, pp. 40-41)
Furthermore, patents are the tools used for legally protecting innovation. However, they are not
always used to protect real innovation, but rather transformed by patent trolls into economic
weapons. Patent trolls are those who buy low-quality patents exclusively on the purpose to threat of
expensive litigation. The issue is that companies consequently lose time and money to defend their
45
http://thenextweb.com/entrepreneur/2014/04/01/build-tech-ecosystem-essential-building-blocks-city/
39
case in court. They could instead dedicate their resources to research and development. Therefore,
governments need to set a protective legal system for entrepreneurs and innovation in general (UP
Global, 2014, p. 43):
Make easier for companies to recover litigation’s fees from patent trolls:
Grant a patent only when an invention is useful, novel, not obvious and determined in
details and in a precise patent scope - Less there will be broad functional patents, less there
will be patent actions;
Identify and sort out the existing bad patents;
Propose alternative to expensive and time-consuming litigation when suspecting a legal
action from patent trolls.
Last and not least, governments should take an important stake in fostering research and
development (R&D) within the ecosystem by direct investments or by focused government
programs incentivizing ventures to invest capital in R&D. Those measures will create a virtuous
circle leading to more innovations, more employment and more economic growth.
40
3. Silicon Valley
3.1 Introduction
Silicon Valley’s success was made possible through the completion of several features which
because they were innovation facilitators whetted the ecosystem. The starting point of Silicon
Valley has been made possible thanks to Stanford University, which was founded in 1891 in Palo
Alto and aimed at competing with East American Universities. Frederick Terman, an engineering
professor of Standford, played a major role in recruiting the best students and professors, and in
convincing the students to stay in the region after graduation. From this initiative resulted student
enterprises like Hewlett Packard. (Gore and Mhatre, 2002)
However, Silicon Valley’s legacy is recognized to be the Cold War era when billions of defense US
dollars were invested into Stanford and the high-tech cluster of the Valley to support research and
development. A microelectronics industry gradually emerged and attracted companies, graduate
students, researchers and other talent to the Santa Clara Valley. The foundations of the current
Silicon Valley then result from “the Rise of the Gun Belt”, which attributes the economic
restructuring of the US after World War two to the rise of the American military industrial complex
(MIC) that facilitated the emergence of a new industry based on high technology. (Markusen, 1991)
After World War two, the San Jose Chamber of Commerce decided to attract new industry to the
area and companies like Ford, Lockheed, IBM, etc. moved their facilities to the Valley in the
decade of the 1950s (Biradavolu, 2008, Kindle Locations 226-228). There emerged in the 1960’s
the industry of semiconductors, first focusing on the performance of the product before competing
on the basis of function of the semiconductor. Next, the microprocessors industry started in the
1980’s with IBM and Apple notably. (Lee, Miller, Hancock and Rowen, 2000, pp. 63-70)
Apple changed the perception of the Valley which “would no longer be a semiconductor component
supplier but a system supplier. Not only was Apple providing systems, but it was selling systems
that were being marketed to consumers through a whole new retail channel – the computer retail
store.” (Lee, Miller, Hancock and Rowen, 2000, p. 71)
41
It is really in the 1990’s that Silicon Valley became a center of entrepreneurship. The ecosystem
attracted entrepreneurs and ideas, funding agents and investors so that all the stakeholders were
gathered at one same place. Silicon Valley has also become the epicenter of many startup
ecosystems emerging at many places since then. In 1999, overall value per employee reached
$115,000 compared to $78,000 on average in the US (Lee, Miller, Hancock and Rowen, 2000, p. 2).
3.2 High tech innovation, lean startup and design thinking
3.2.1 High tech innovation
Silicon Valley is a perfect ecosystem for startups and entrepreneurship where people come and
develop innovative ideas and where high tech is the most important field of entrepreneurship. It has
always been a forerunner in high tech innovation, all simply because of its history and the strong
partnerships with the institutions and the industry. Most of the startups are technology-driven.
Junfu Zhan, Professor of Economics, explained the supremacy and dynamics of Silicon Valley as
follows:
Start-ups in Silicon Valley have more rapid access to venture capital than comparable firms
elsewhere in the nation; that large, established firms spin off more start-ups than firms in
other parts of the country; and that the high-tech sector is subject to rapid structural change
where “hot spots” of growth may appear in some industries while firms in other industries
are simultaneously dying out. (Zhan, 2003, p. iv)
University research supported by the State government always played a crucial source of innovation
as well (Zhan, 2003, p. 77). The high-tech sector consists of several industries, which follow
different dynamics. He explained the 1990's, when the computer industry performed along with a
decline in the defense industry, there was a fast structural change in the high-tech sector:
Silicon Valley increased from 48,500 to 114,600 between 1990 and 2001, a phenomenal 136
percent growth rate. [...] This kind of rapid growth in a certain industry is achievable only
through massive migration of the needed labor force. (Zhan, 2003, p. vii)
The particularity of the high tech industry is that different industries serve different markets where
different workers have different skills, which are not completely usable in different industries. It is
therefore necessary to have a stable and flexible high-tech structure, which can adapt itself to the
42
economic pace of the industry (slow vs. fast). The goal is to take “[…] full advantage of new areas
of growth […] and [shift] when a major industry shrinks.”(Zhan, 2003, p. 16) Silicon Valley was
the perfect place to be.
Nowadays, high tech innovation refers to many emerging radical innovations like robotics, drones,
the Internet of Things (IoT), etc. Once again, Silicon Valley remains the global leader and a big
stake of the world famous high tech startups which have emerged these last decades are from
Silicon Valley. The Bay Area Council Economic Institute, source of information and analysis in
California, states that in the US “the creation of one job in the high-tech sector of a region is
associated with the creation of 4.3 additional jobs in the local goods and services economy of the
same region in the long run”. (Bay Area Council Economic Institute, 2012, p. 5; cited by UP
Global, 2014, p. 9)
3.2.2 Lean startup
Lean startup is a methodology which incorporates hypothesis-driven experimentations based on
iterative minimum viable products for validating market opportunities. Eric Ries theorized this
methodology in 2011 in his world famous book The Lean Startup: How Today's Entrepreneurs Use
Continuous Innovation to Create Radically Successful Business, claiming that startups could
definitely benefit from iterating their products during the phase of experimentation. They could in
turn better meet customer needs and requirements while cutting down initial project funding,
business expenses and failure risks.46,47
The important theory coming out of this book is that flexible pre-planning and market validation are
essential when moving an idea to a startup since they alleviate the probability of failure for the
entrepreneurs. A business model will help and enable better chances of market success in that sense:
By pivoting their first ideas and validating their market based on feedback (learning) from early
adopters, the startup applies the required changes to its business model which will in turn alleviate
the risk of market failure and increase the probability of fit between its product/service and its
market segment.
46
https://hbr.org/2013/05/why-the-lean-start-up-changes-everything 47
http://steveblank.com/2014/07/30/driving-corporate-innovation-design-thinking-customer-development/
43
This methodology is nowadays applied by a lot of startups in Silicon Valley and even in other
emerging startup ecosystems where the principles are taught through workshops or discussed within
the context of lean startup circles.
3.2.3 Design thinking48
Design thinking is a design related cognitive approach used for creative and problem-solving action
and whose final purpose can be business related. Design thinking really looks for combining
empathy for the context, creativity in the solutions and rationality in fitting various solutions to the
context. The real advantage in using this approach is that they provide entrepreneurs with improved
problem solving methods to ideate, select and execute solutions for matching their target’s needs
and requirements. The purpose of design is to transform an idea into a tangible (product= or
intangible (service) outcome (O'Sullivan and Dooley, 2009).
In the 1980s and 1990s, Professor Rolf Faste from Stanford University has been one of the first
academics to teach design thinking as a management tool for innovation. Next, IDEO, which was
founded by Faste’s Stanford colleague Professor David M. Kelley in 1991, started to use design
thinking methodology across industries and challenges to design products, services and processes
using “user centricity” as innovation approach.
Dr. Srinivas Padmanabhuni told me that “design thinking is a mechanism for a systematic way of
carrying out innovation.” and that “[…] it is all about keeping end users in perspective” (Srinivas
Padmanabhuni, personal communication, June 15, 2015). Further, Professor Krishnan admitted that
today “more and more products and services are becoming user needs driven”. He also put forward
the term “user centricity” as being well aligned with the customers and trying to understand how to
make a better user experience. In Silicon Valley, most of the businesses involved in e-services, like
other experts from the US also confirmed, have a strong design-driven approach to innovation.
Uber49
48
http://designthinking.postach.io/post/what-is-design-thinking
44
Uber is a software company active in the transportation sector. They are a very good and recent
example of startups which made a disruptive innovation by using high tech innovation and design
thinking. The value proposition of Uber is the connection between the driver and the passenger.
The disruptive innovation is based both on the business model and on the technology used. We can
state that here the application technology is inseparable from the business model. One cannot exist
without the other:
1. The business model disrupts the traditional taxi business model, the city taxes and traffic:
low inventory, high transaction, and high margin. As a software company, Uber does not
own any of the vehicles used for generating its profitability.
2. The technology: app technology for consumers and demand calculation for the drivers
o The app technology uses GPS to display the pickup destinations and the cars.
o Demand calculation (prediction algorithms and heat maps) is used to estimate the
demand at different times: “It analyzes how many times the app is open and where
clusters are located to help manage taxi supply and demand. The result: “shorter
waits for riders and busier, more efficient days for drivers” (Boeckel, Sprunger,
Smith and Work, 2012, p. 4).
Drone GoPro – TPV (Third Person Camera) – In development
49
http://www.web-strategist.com/blog/2014/02/12/ubers-business-model/
Figure 7 – Value Proposition Canvas of Uber (Boeckel, Sprunger, Smith and Work, 2012)
45
The Drone GoPro can also be considered as disruptive innovation which will result from a high-
tech innovation (camera drones) and a product innovation (design the usage of the radical
technology for activities - extensions).50
Wearable cameras using a First Person View (FPV) have
been a great success for GoPro, but now a new product has been developed by the industry: Third
Person View (TPV). This latter will be supported by a drone. Therefore a radical innovation is
necessary to support this next version of cameras.
The technology of drones is still at the very initial stages of development. Since the price of drones
is very expensive, it is very hard yet to commercialize such an innovative product, even though in a
near future they will “[…] get cheaper, smaller, lighter, and more portable and they will see
improvements in battery life. Camera technology is also getting miniaturized with ultra HD 4K
imaging now possible from an affordable matchbox-sized camera […]51
Furthermore, if the
technology of drones could be miniaturized and integrated into a wearable platform, there could
emerge plenty of applications for people in many different everyday activities.
50
http://fr.slideshare.net/funk97/gopros-wearable-camera 51
https://www.tractica.com/wearable-devices/with-gopro-doing-drones-its-time-to-rethink-wearable-cameras/
Figure 8 – Value Proposition Canvas of Drone GoPro
46
3.3 Stakeholders and key components
3.3.1 High impact entrepreneurs
The spirit of entrepreneurs is definitely optimistic since there are many examples of people having
failed before to succeed. Failure is therefore considered as something valuable that each
entrepreneur can learn from: “The appetite for radical change is what drives the culture of Silicon
Valley, where the mantra of innovation is, ‘Fail often and fail fast’” (UP Global, 2014, p. 27)
The development of ideas and business at Silicon Valley is one of the most productive over the
globe. There are different stakeholders who feed up the development of business ideas:
- Employees in established on-site startups and companies
- Students and schools (especially the University of Stanford)
- Venture capitalists and business angels
- Top foreign talent
Silicon Valley in particular has benefited from the skills and experiences of entrepreneurs around
the world who have been attracted by the advantages offered by the Silicon Valley. Over half of the
startups in Silicon Valley have one or more immigrants as a key founder. They bring dynamism and
want to succeed more than anybody else. Therefore, they are high-impact entrepreneurs. (Legrain,
2007) Therefore, there is certainly a positive impact on economy if foreign high-impact
entrepreneurs would emigrate to US. This has been proved by the Kauffman Foundation:
While there exists no specific U.S. visa program for entrepreneurs, there have been
proposals recently for a ”Startup Visa” for non-U.S. citizen entrepreneurs who can attract
investment from a qualified U.S. investor. The Kauffman Foundation analyzed the job-
creating potential of one current legislative proposal and the results were impressive. The
conservative estimates project that a startup visa could create between 500,000 and 1.6
million new American jobs in 10 years, making it an attractive component of a new “jobs
act.” (UP Global, 2014, p. 9)
Moreover, those groups of immigrants build networks with research centers in their home country,
so that Silicon Valley leverage on the skills, technologies and markets of other regions afterwards
(Lee, Miller, Hancock and Rowen, 2000).
47
3.3.2 Community & culture
The business climate in Silicon Valley encourages risk-taking and failure is not negatively
perceived in comparison with other places over the globe where innovators are less risk-lovers.
The ecosystem is based on a merit system called system of meritocracy, where everybody, given
ethnicity, gender, age, origin, seniority and experience, has the same chance for success. More
especially, Silicon Valley’s ecosystem leverages on the groups of immigrant entrepreneurs who
facilitates business connections with their home countries. A lot of cross-cultural organizations
exist; they can be networks, incubators or accelerators (e.g. The Indus Entrepreneurs, swissnex San
Francisco, German accelerator, etc.)
The structure of the organizations is flat in order to integrate the manager within the team by
considering him as team member and player. There are no single responsibility but sharing of tasks
and responsibilities among everyone (Perry Piscione, 2013, p. 121). The business environment is
extraordinary open in the sense each startup employee can generally access the relevant company
data and take a stake in the decision process. Everyone can inspire the whole organization with
initiatives and ideas. Perry Piscione cited the example of Larry Schwimmer, a software engineer of
Google, who proposed to his company a management system consisting to emailing the employees
on a weekly basis for asking them about what they did the previous week and what they were going
to do in the coming week, so that then each employee’s report is compiled in a public open
company database. The workforce cycle is also very mobile in the sense that it is very frequent to
see people moving from one company to another one, which in turn feeds up the feeling of
community as “[…] the knowledge is spread throughout the community, and professional
employees find positions that maximize their contributions” (Lee, Miller, Hancock and Rowen,
2000, p. 8).
In the 1980’s, there was mostly a phenomenon of vertical integration through alliances and joint
ventures while in the 2000’s started this process of outsourcing functions and activities thanks to the
reduced cost of ICT and the advantages of open standards. Therefore, even though the competition
is very fierce between entrepreneurs in Silicon Valley (+800 patents), there is an attitude toward
open business relationships and knowledge sharing at the same time. It is believed that everyone
can learn and win when sharing secrets, included the holder of the secret since the whole
community can benefit from the innovation while connecting their own platforms or products with
the innovation. There are strong and diverse collaborations among business, government, and
48
nonprofit organizations happening in Silicon Valley. Those actors are generally funded and
managed by leaders of the private sector who are willing to support the ecosystem further. For
instance, these organizations aim at improving the education system, optimizing ICT, facilitating
government operations and interactions with the private sector, etc. More importantly, there are
several support services that play a key role around the startups and they are numerous in Silicon
Valley: finance, law, accounting and consulting. (Lee, Miller, Hancock and Rowen, 2000)
Silicon Valley is also very famous for being a Pay-It-Forward culture; that is that people are willing
to be helpful with each other, they network and connect to strangers. Ahmed Siddiqui, entrepreneur
living in Silicon Valley, explained during a swissnex webinar in San Francisco that during
conferences and meet-ups it is possible to meet and easily reach out mentors who can for instance
lead to funding or connect to investors and they don’t ask for something in return, but just simply
help people out.52
Bernard Moon, Founder of VIDquik - free web conferencing platform, explained
the reason why people in Silicon Valley have such a business practice: “Most people understand
that it’s not the idea, but the execution that creates the bridge towards success. A common saying is
that for every “brilliant” startup idea you have there are at least 10 other people thinking the same
thing, so it becomes a race to execution.”53
Last and not least, there are a lot of opportunities in Silicon Valley. Each day, there are at least 4-5
events where you can build up a network (startup knowledge) with people coming from different
backgrounds. Rich Mironov to add: “SV has thousands of (e.g.) UX/UI meetups, lean startup
groups, marketing forums, ad tech groups, IoT events, etc.” (Rich Mironov, personal
communication, June 7, 2015)
Below is a non-exhaustive list of networks and platforms in Silicon Valley:
INSTITUTE FORMAT VALUE PROPOSITION WEBSITE
Bootcamp Online platform and community
Online coding bootcamps https://www.coursereport.com/cities/silicon-valley
Startup we
Competition and Network
1-Weekend platform to share ideas, form teams, build products, and launch startups
http://siliconvalley.startupweekend.org/
SV
Festival 3-day culinary and tech festival http://bitesv.com/
52
http://www.swissnexsanfrancisco.org/event/siliconvalleystartup/ 53
http://s.co/startup-pay-it-forward-culture-drives-innovation
49
Startup Grind
Community world’s startup community, actively educating, inspiring, and connecting founders
Manage events, media, and partnerships with organizations like Google for Entrepreneurs
200,000+ entrepreneurs in 70 countries
http://www.startupgrind.com/
Lean Startup Circle
Workshop Dedicated to applying lean startup thinking and building lean startup leadership
http://www.leanstartupcircle.com/groups
Blackbox Connect
Program two-week residential program
designed to immerse
international startup founders
http://blackbox.vc/connect/
Silicon Valley NewTech
Community and Networking
Monthly event
free to attend, and includes some pizza and drinks.
Networking
5 demos from startups.
http://www.svnewtech.com/
Hackers and Founders
Competition and Network
Empower global founders so more startups succeed
Networking and hackkathon
200’000 members in 42 countries in 7 years
http://hf.cx/
TechInMotion
Community and Networking
Bring local tech communities together to meet, learn, and innovate
More than 20’000 members worldwide
http://www.techinmotionevents.com/
TiE Community, Networking and Incubator
Foster entrepreneurship in the Bay Area
50 events/ year
http://sv.tie.org/
Figure 9 – Networks and platforms (main source: swissnex San Francisco, 2014)
3.3.3 Government & regulation
The American system has been more favorable to business ventures and entrepreneurships
compared to any country on the globe. The system, even though it is decentralized and fragmented,
provides a stable and uniform regulation throughout the country. Bankruptcy laws have been issued
to favor the risk tolerance of entrepreneurs. On one hand, laws permitted limited liability to
investors and entrepreneurs and restricted creditors to liquidate beyond the company. On the other
hand, laws positively impacted entrepreneurship, especially those offering a part in stock equity in
the company in return for ideas, work and other contributions. (Lee, Miller, Hancock and Rowen,
2000)
50
As mentioned in the Startup Ecosystem Report 2012 (Startup Genome, 2012, p. 11), the policy
maker should continue to support the current legal model:
1. Decreasing the payroll tax to support high-head count low revenue tech companies
(http://www.reuters.com/article/2012/10/29/us-sanfrancisco-conway-
idUSBRE89S05F20121029)
2. Supporting the development of new “collaborative consumption” startups, such as AirBnB,
by deregulating lodging ordinances that protect hotels and bed and breakfasts, and Lyft, by
deregulating traditional transportation services like taxi cabs to support ride sharing
services.
3. The national government could vastly improve Startup Ecosystems in the United States by
supporting the Startup Visa Act and making it easier for International entrepreneurs to stay
in the country and create jobs and wealth for other American citizens.
(http://startupvisa.com/)
3.3.4 Universities & education
Stanford University, U.C. Berkeley, and U.C. San Francisco play a key importance “[…] to conduct
research that is relevant to high-tech startups in many fields, and they also replenish the intellectual
pool for Silicon Valley […] by training graduate students at both the master’s and Ph.D. levels.”
(Lee, Miller, Hancock and Rowen, 2000, p. 212)
Stanford highly contributes to provide the ecosystem with high-quality talent. (Lee, Miller,
Hancock and Rowen, 2000, p. 8) The huge advantage of Silicon Valley is about the two-way
relationships and partnerships that have been established between the private sector and the
universities (Lee, 2000). This is a real advantage for high-tech companies to benefit from rich
sources of advanced research and experienced scientists. Stanford Industrial Park was also created
in 1951 for providing technology transfers from university laboratories to companies (Lauder
Institute Global Knowledge Lab, 2012). Moreover, university-based ventures have a better chance
of success on the market compared to U.S. ventures founded outside of universities:
Evidence shows that companies with roots in American universities that are able to
overcome these challenges are particularly promising — 8 percent of these companies will
go public in comparison to a “going public rate” of only .07 percent for U.S. enterprises
founded outside of universities – a difference of 144x National council of entrepreneurial
Tech Transfer (NCET2), (UP Global, 2014, p. 12)
51
Furthermore, the communities of former students – alumni – are also very important in Silicon
Valley and contribute to strengthen the professional network between them, especially because a lot
of those alumni are the next generation of leaders of Silicon Valley: “Stanford alumni and faculty
have created nearly 40K companies and 5.4M jobs with annual revenues of $2.7 trillion” (UP
Global, 2014, pp. 22-23).
Last and not least, the University offers university program support for entrepreneurs (UP Global,
2014, p. 12)
The Program in Innovation and Entrepreneurship run by Stanford Graduate School of
Business targets students outside the business school with ideas that could be
commercialized. The three-month, part-time program teaches entrepreneurial skills and
introduces participants to external investors and experts.
Steve Blank’s ‘Lean Launchpad’ class, hosted by the Stanford Department of Engineering,
plays a similar role for graduate students across disciplines.
Stanford’s StartX program and MITs 100K competition provide opportunities for students to
apply their education in real settings, leading to new developments and experienced
founders.
Below is a non-exhaustive list of institutes located out of the Bay Area (best ones):
INSTITUTE TYPE/AREA VALUE PROPOSITION WEBSITE
Stanford Research Created in 1891
World's leading teaching and research universities
2000+ faculty members and 21 Nobel laureates
https://www.stanford.edu/
U.C. Berkeley
Research Founded in 1868
170 academic department programs
7 Nobel laureates
http://www.berkeley.edu/
U.C. San Francisco
Research Founded in 1864
4 Nobel laureates
https://www.ucsf.edu/
Figure 10 - Institutes (main source: Kenney, 2000)
3.3.5 Incubators & accelerators
There is a very wide range of incubators in Silicon Valley. It is a great way of building a network
very fast. There is a great specialization of accelerators in business areas and there are also other
great incubators and accelerators that cater to foreign startups. In case of foreign startup, it is
important to check up there will be a CFO who will understand international finance as well as
lawyers for international law; plus that the startup has sufficient market traction to enter the U.S.
52
market54
. They provide seed funding, corporation and legal services and offer peer-funding as well.
The selection process is very hard. There are too many incubators/accelerators and it is therefore
difficult to choose.
Below is a non-exhaustive list of incubators/accelerators based out of Silicon Valley:
INSTITUTE VALUE PROPOSITION WEBSITE
HUBVentures
Social spaces for social change http://www.hubventures.org/ventures
Imagine K12
Accelerator dedicated to education startups http://www.imaginek12.com/
Rock Health
Rock Health has also worked with overseas startups, but they are no longer an accelerator
Give startups up to $250K and provide support
Dedicated to healthcare startups
http://rockhealth.com/
yetiZen
Accelerator program dedicated to scalable game studio and platforms startups.
http://yetizen.com/
500startups
Accelerator
Provide mentors
2000+ founders, 1000+ companies and 50+ countries
http://500.co/
YCombinator Invest twice a year a small amount of money ($120k) in a large number of startups (most recently 85)
3-month acceleration
http://www.ycombinator.com/
Rocketspace Coworking space http://rocketspace.com/
Kicklabs – f6s
Accelerator for digital media companies https://www.f6s.com/kicklabs
i/o Ventures
Early stage startup program that focuses heavily on mentorship
http://ventures.io/
Figure 11 – Incubators/Accelerators (main source: swissnex San Francisco, 2014)
3.3.6 Funding & capital sources
Venture capitalists and business angels are often very experienced (experience in running a high-
tech venture) and do even more than funding the startups; they also coach founders and give them
active advice. They provide the funds necessary for the startup to grow into a sizeable business, in a
position to undertake an IPO or to be acquired by another company. In Silicon Valley, there is an
online Journal dedicated to venture firms. It is called Silicon Daily55
and they speak about Silicon
Valley Venture Funding News. All the venture and corporate venture firms are listed on this
website.
54
http://www.forbes.com/sites/drewhendricks/2015/02/17/7-leading-accelerators-for-overseas-startups-coming-to-silicon-valley/ 55
http://www.svdaily.com/capital.html
53
There are tones and tones of venture capitalists in Silicon Valley. They are considered as super
heroes. Ahmed Siddiqui, entrepreneur living in Silicon Valley, explained during a swissnex webinar
in San Francisco that a typical investment lies over 1 million to 20 million investments. It is better
to raise money from angels before. Entrepreneurs should go to venture capitalists only when the
product and the market traction were tested; it is more a growth capital.56
Ahmed Siddiqui advised to engage with those people before asking them for money. Venture
capitalists give funding, great advice and help to with further rounds. Once you have funding, you
have more capability, but also more accountability (other people to report to).
Overhead, over $40 billion have been invested in Silicon Valley alone. It is where most of the
venture capitalist firms are based. Moreover, capital raised in Silicon Valley is 32% higher across
all stages of a startup’s development (Startup Genome, 2012, p 9).
Figure 13 - Funding sources (Startup Genome, 2012, p. 12)
56
http://www.swissnexsanfrancisco.org/event/siliconvalleystartup/
Figure 12 – Actual stage distribution (Startup Genome, 2012, p. 12)
54
3.4 SWOT
Helpful Harmful
Internal Origin
Supporting and leading hardware and software
incumbents (Microsoft, Apple, etc.)
Open, collaborative and talent culture
Very high competitiveness fostering innovation
Very well organized, specialized and developed
ecosystem
Fast try-out and pre-commercialization of
prototypes
Financial resources
Very high-skilled pool of talent
Proximity of the stakeholders
Constant flux of new ideas (Jai Asundi, personal
communication, June 27, 2015)
Global reach (Jai Asundi, personal
communication, June 27, 2015)
Strong IP protection (Mauktik Kulkarni, personal
communication, June 14, 2015)
Huge governement incentives and supportive
regulations (Mauktik Kulkarni, personal
communication, June 14, 2015)
World class R&D institutes (Mauktik Kulkarni,
personal communication, June 14, 2015)
High standards of life (real estate, food,
etc.)Lack of frugal products/services
Human resources shortage on-site
Far from real market (Jai Asundi, personal
communication, June 27, 2015)
External Origin
Number 1 - hard to perform better
Loss of attractiveness to international
entrepreneurs and investors because of the
high cost of living
Income inequality and economic residential
segregation
World emergence of many innovation
ecosystems as potential and competitive
alternatives to Silicon Valley (access to cheap
and efficient resources: internet, talent,
mentors, etc.)
Make the skills balance between the needs of
the New Economy and the demographics on-
site
55
4. India’s Silicon Valley: Bangalore
4.1 Introduction
Before introducing Bangalore, it is primarily to consider the socio-economic and socio-cultural
context of India, which has a great impact on the startup ecosystems of Bangalore as we will see in
the next sections to come. India is a huge country and market with more than 1 billion and 200
million people, out of which more than 50 percent are still living in rural and remote areas. There
are hundreds of millions people being the Bottom of the Pyramid, that means those people are
living in very low socio-economic conditions with less than $2.50 a day57
. Therefore, innovation is
going to play a key role in the socio-economic development of India for enabling a sustainable and
inclusive development of its people, as declared by Dr. Sam Pitroda, Adviser to the Prime Minister
of India and Chairman, National Innovation Council.58
The point is that innovation in India needs to
simultaneously meet the needs and the high constraints of the market. This latter refers to the
overpopulation, the scarce resources available and the low affordability. In that sense, there are so
many overcoming challenges in India (overpopulation, urbanism, waste and recycling
infrastructure, etc.) that it is very simple for entrepreneurs to come up with one solution and create
an impact as long as this innovation is frugal enough to satisfy the requirements of the market. India
encountered many challenges from the 1950’s till the 1980’s in the manufacturing industry. Many
constraints had to be overcome: different climate conditions, different quality raw materials and
untrained workforce. So the focus was on improving the efficiency of the processes in order to
reach international productivity levels (Krishnan, 2011)
Bangalore has always been into technology and is also known as the IT capital of India. The
inception of its technological advancements can be traced with the setting up of the first Indian
Institute of Science in 1909. Many scientific contributions to the country came out of the institute:
advanced computing, space and nuclear technologies (Krishnan, 2011).
In November 1984, a software policy ”[…] recognized software as an ‘industry’ […], lowered
import duties on software and personal computers (PCs) and permitted the import of computers in
exchange for software exports at a special low duty.” (Saxenian, 2001, p. 5) The innovation
57
http://www.globalissues.org/article/26/poverty-facts-and-stats 58
http://wbi.worldbank.org/wbi/stories/india-set-accelerate-growth-through-inclusive-innovation
56
ecosystem of Bangalore has then been called India’s Silicon Valley for the simple reason that
Bangalore is considered to be a leading place in IT services all across the globe. The startup
ecosystem in turn emerged in the beginning of 2000’s with many startups which specialized
themselves into IT services and nosiness process outsourcing (founded by former employees of
large IT services companies like Wipro, Infosys, etc.).
The observation that can be shared is that it has also been necessary to use a way of innovating to
enable the startups to tackle the socio-economic issues and national deficiencies in many sectors
like education, healthcare, finance and others. The startup ecosystem in Bangalore enhanced
particularly on the mobile and cloud front during the last few years. As Shadha Sharma, the founder
of YourStory - India’s biggest platform for startups and entrepreneurs of the startup ecosystem,
explained, challenges are transformed into business opportunities in India59
:
India is a country with a lot of languages … we’re the only country where you go to 100 km
away and there will be some other language being spoken. So there are companies in the
mobile space who are leveraging that and coming up with language-based solutions like
Reverie Language Technologies.
There is even a category of entrepreneurship (social high impact entrepreneurship) which makes a
lot of sense in India (given the enormous local and social challenges) and it is applied to the lower
market segment, that Prahalad calls the “Bottom of the Pyramid” market (20-25 % of the overall
Indian population according to Professor Krishnan, personal communication, June 10, 2015). This
latter induces four intertwined factors which impact the development of the product or service of
the social entrepreneurs. (Prahalad, 2005)
Figure 14 - The interwined factors at the BOP (Ruohonen and al (eds.), 2012)
59
http://tech.co/india-startup-scene-shradha-sharma-2012-05
57
4.2 From Jugaad to frugal innovation
India is worldwide famous for the talent of its people to improvise and find tricks to the daily
challenges. It is certainly a fast process of design thinking the Indians go through when they want to
solve a problem they face to, but it is certainly wrong to call it innovation sensu stricto. We should
rather use the term invention or creation as many of the experts I made interviews with generally
agree. However, when it comes to do business beyond Jugaad we can speak about a more systemic
process of innovation called frugal innovation.
4.2.1 Jugaad
Jugaad is a term used in India to define an unscientific and unsystematic paradigm of innovation,
which aims at converting adversity into opportunities based on individual ingenuity and
improvisation.60
Shradha Sharma, founder of Indian tech blog YourStory, defined Jugaad as
follows: “Jugaad means that when you don’t have anything, you learn jugaad, which is to
collaborate, to get things, to work your way so that people help you – without having any resources
or anything.” (Shradha Sharma, cited by Newman, 2012) In other words, it is about finding a quick
fix, a one-time bandage solution or a makeshift and temporal workaround to socio-economic and
socio-environmental challenges of the Indian society, while passing by the myriad of administrative
obligations imposed by the government and with the purpose of using limited resources61
.
During my stay in India, I heard many times the following idiom: “Everybody’s an entrepreneur
here.” Many of innovative solutions under the Jugaad spirit have been listed on The Honeybee
Network (www.sristi.org/honeybee.html). They are generally created by farmers and grasssroot
entrepreneurs who look for solving challenges they encounter in their activities and daily tasks
(Krishnan, 2010).
60
http://www.forbes.com/sites/ashoka/2014/03/23/jugaad-the-art-of-converting-adversity-into-opportunity/ 61
http://yourstory.com//2012/09/jugaad-innovation-a-frugal-and-flexible-approach-to-innovation-for-the-21st-century/
58
However, Jugaad, showed its limits according to many for the following reasons:
- Influence on innovation: India still ranks bad in the Global Innovation Index, 66th
in 2014
and 76th
in 201462
- Scalability: Since there is no engineering base, there is no supporting organization which
could facilitate the process of scaling-up the creative solutions of Jugaad
- User/customer needs understanding: The applications of Jugaad are also mitigated since
they only address limited user needs. The innovation process does not test the market
application before coming out with a solution; it first comes with a solution to an individual
problem without expecting the solution to be universally helpful.
Nowadays, it is believed that there is no possible way successful with only creative improvisation.
Therefore, it is important for startups to apply a systematic approach to Jugaad, especially if they
want to be frugal while answering at best the challenges of as many people as possible. It is the
content that is discussed in the next section.
62
https://www.globalinnovationindex.org/content.aspx?page=data-analysis
Figure 15 - Jugaad - The Art Of Converting Adversity Into Opportunity (Forbes, 2014)
59
4.2.2 Frugal innovation
Frugal innovation inherits from Jugaad the characteristic of innovation born of ingenuity and
improvisation while using an organized, systematic and design-related approach of innovating for a
large market. This word became popularly used since the 2000’s, especially in the emerging
countries where it is necessary to be efficient because of the limited resources available. There are
so many people living in India, around 1’300’000 people, that it is so difficult to satisfy each of
them independently with sophisticated and high-tech products and services. Because of resource
shortage, innovators and entrepreneurs have to solve up their national challenges in different tricky
ways while addressing their people’s aspirations as well. (Dabholkar and Rishikesha, 2013)
More precisely, frugal innovation is a way of thinking and reacting to constraints and challenges, in
order to “do more with less”. In other words, the frugal innovation aims at maximizing the value
delivered to stakeholders, while minimizing the cost of the resources used (especially capital,
technology, and electricity). Frugal innovation thrives in environments which are harsh,
bureaucratic, and culturally diverse, with poor infrastructure and inadequate access to finance and
skilled human resource
This concept facilitates the emergence of affordable solutions which enable to overcome challenges
and answer requirements and needs of populations living in difficult conditions for different areas
such as agriculture, health, education, finance and energy. There are six principles which
complementarily anchor the concept of frugal innovation (Radjou et al., 2013):
1. Resilience: transform adversity into opportunity;
2. Efficiency: provide more value while spending less resources;
3. Flexibility: adapt constantly the product/service/business model to the environment;
4. Simplicity: keep the solution as simple and functional as possible;
5. Empathy: target everybody included the marginalized and poor communities;
6. Passion: use intuition to define the solution.
As Vikram Ahuja (personal communication, June 22, 2015) told me, customer expectations have
gone up in India today. Everyone is expecting a commendable user experience and a minimum of
functionalities. The final solution must then be robust enough, but affordable enough since the
Indian market is still very price-value sensitive.
60
There are basically two ways via which most of the startups innovate in Bangalore from frugal
innovation. Either they copy successful business models from the Western World and apply
incremental innovations to them for local application in priority, or they are disruptive in the sense
they use existing or new innovations to target untapped or underserved markets in India in priority.
Using incremental innovation: Hike Messenger vs. Whatsapp
There are numerous examples of Indian startups which have been inspired by the business models
of Western companies, mostly those from US, and have copied them before adapting them to the
cultural context of the Indian market. The focus remains generally local since the domestic Indian
market is self-sufficient. According to Mauktik Kulkarni, Indian innovation has proved that there is
a huge cultural context to innovation:
Most of the big ‘innovative’ Indian companies of today have primarily copied innovations
from the West and tailored them to the Indian culture and society. It’s a good thing that the
Indian market is huge (1B+ people). The bad thing is that investment in R&D is extremely
low. Unless the academic/industrial R&D investment and culture change, the Indian
ecosystem will not go to the next level. (Mauktik Kulkarni, personal communication, June
14, 2015)
I decided to select one very famous example to show how Indian startups fit their value position to
their market, while getting inspired by the business model of their overseas market competitor. Hike
Messenger, launched in 2012, is a cross-platform instant messaging service considered as the Indian
competitor of WhatsApp. Indeed we can say that the business model of Whatsapp (launched in
2009) was replicated by the Indian competitor at the very beginning. Now, Hike Messenger
succeeded to stand out with attractive differentiation compared to Whatsapp, in order to answer the
needs and requirements of the Indian domestic market. Indeed, it is said to be popular with Indian
teenagers for its “hidden” chats, which disappear without having to be deleted.63
The differences by
category with Whatsapp are the following ones64
:
FEATURE HIKE MESSENGER WHATSAPP
Media Size and Media Quality
Hike offers maximum 100MB of size per file
Whatsapp. offers of 16MB of size per file
63
https://www.techinasia.com/hike-hidden-chats-20-million-users/ 64
http://teckfreeks.com/whatsapp-vs-hike-is-hike-messenger-better/
61
Document Support
Hike provides format support for .ppt, .docx, .pdf etc. Document transfer up to 100MB
Whatsapp does not support document formats
Custom Chat Themes for Conversations
Hike offers to customize themes for each conversation
Whatsapp gives the possibility to change the background wallpaper
Stickers and Emoticons
Hike regularly update stickers every 2-3 months
Whatsapp was the first time to start the emoticon revolution (always the same)
Free Messages to Non-Hike Users
You can send your friends (even if not members) free SMS messages using Hike.Each Hike user is given 100 free SMS each month
Free/Pay Services
Hike is an ad-free messenger with free services
Whatsapp is free for the first year, then its 0.99$
Better Privacy
Hike users have to send and accept friend requests to ensure privacy
Whatsapp uses the contacts from the phonebook and matches them with the Whatsapp users and then automatically add all the contacts to Whatsapp
Figure 16 – Whatsapp vs. Hike: How does Hike differentiate itself from the leader?
(Raina, 2014)
Using disruptive innovation: Forus Health
Forus Health is a Bangalore-based ophthalmic technology and solutions company (medtech) which
addresses the problem of preventable blindness globally, with a focus on the populations of
emerging and poor countries (prevented 150,000 people going blind). There are around 40 million
blind people on the planet and Indian blind people account for one tier of the world population
(around 12 million people). 80 percent of the cases of blindness could have been prevented if there
would have been interventions at an early stage.65
Forus Health implemented automatic imaging
software which can detect eye problems leading to 90% of preventable blindness. This device can
be implemented in many places, in order to broaden the scope for screening. Their product under
the name 3nethra “[…] can detect 5 common eye problems in a single screening, automated
analysis and report generation; and cloud based storage of individual data, all rolled into a single,
compact machine.”66
Only the people who need to go for treatment will go to hospitals. Forus
Health is disruptive by being inclusive through a radical and frugal innovation. The value
proposition canvas of the company really brings out this dual capability (radical/frugal).
65
https://www.youtube.com/watch?v=AnlF6SBaWPE 66
http://forushealth.com/forus/Innovation.html
62
4.3 Stakeholders and key components
4.3.1 High impact entrepreneurs
Indian entrepreneurs generally have a technical background because of the great cultural importance
given to engineering in India, but many of them have good managerial capabilities. Indian
entrepreneurs that I came across and met during my stay in Bangalore are highly motivated, keen to
learn new skills and pursue them.
Indian entrepreneurs can be divided in five different categories (Lauder Institute Global Knowledge
Lab, 2012, p. 18):
1. First-time entrepreneurs with 3-10 years of full-time work experience (60%)
2. Serial entrepreneurs (15%)
3. Developers (10%)
4. Internationally educated Indian returnees (10%)
5. Student entrepreneurs (5%)
Figure 17 – Value Proposition Canvas of Forus Health (forushealth.com, 2015)
63
Over the last decade, a strong Indian entrepreneurial community has emigrated to the United Stated
where they have started plenty of new ventures. There have been many who came back to India and
tried to instill the same entrepreneurial spirit and high impact entrepreneurship here as role models
(Ajay Bam, personal communication, June 5, 2015). To have an impact, the entrepreneurs and the
startups must succeed and deliver products or services to masses. If they do so, they will be
“execution-oriented entrepreneurs”. (Sulochana Development Trust, 2014, pp. 34)
Many entrepreneurs with high talent or high-net-worth individuals (HNIs) also decided to give back
to the society as social impact entrepreneurs, especially because of the numerous local and social
challenges of India. And many tech oriented social enterprises in Bangalore have notably tried “[…]
to move social enterprises from idea to prototype to early stage of enterprise.” (Sulochana
Development Trust, 2014, pp. 27-28; World Economic Forum, 2014)
4.3.2 Community & culture
The young low and middle class is generally reluctant to failure and prefers career stability over
career incertitude: “[…] educational qualification and past record are more taken into account and
people are generally apprehensive to work at startups started by college dropouts.” (Harshith
Mallya, personal communication, June 17, 2015) According to Professor Ghose (personal
communication, June 10, 2015) there is still an embedded culture of risk aversion and failure is still
considered a taboo. Consequently, Professor Krishnan (personal communication) reported during
the interview that Indians generally privilege secure jobs, which are well-paid for graduates, rather
that joining a startup where the salary is less attractive: “The risk/reward profile for people to do
startups isn’t there given the limited exit environment. The alternative to a startup is a $100k/year
steady job.” (Mukund Rajan, Microsoft Accelerator; cited by Lauder Institute Global Knowledge
Lab, 2012, p. 19)
This trend is certainly accentuated by the yet emerging economic situation of India. There is still a
large part of the population which does not want to jeopardize a steady source of revenues.
However, there is a rapid change, especially in today’s information economy where countries and
cultures are interconnected. The young Indian generation of entrepreneurs comes with a higher risk
and ambitious mindset and entrepreneurs with few years of professional experience are more
inclined to take risks since they better know how to manage them.
64
As regards successful returnees from Silicon Valley, they serve as role models for the next
generation of Indian entrepreneurs to come by sharing with them their experience and expertise
within the context of festivals, media, workshops and networking events of organizations like The
Secret Sauce, which I personally attended an event here in Bangalore about product development,
and The Indus Entrepreneurs. This latter was founded in 1992 in Silicon Valley by entrepreneurs
originating from South Asia and represents today the largest entrepreneurial network with 61
chapters across 18 countries with the mission to “[…]foster entrepreneurship globally through
mentoring, networking, education, incubating, and funding”67
Furthermore, Bangalore is a very vibrant city: Almost every day there is an event related to
entrepreneurship and innovation happening in the city. Those gatherings are excellent opportunities
to network, to discuss, to share expertise and experience, etc. They are also the opportunities to
address the local and social challenges of the country, to discuss them and to try to solute them.
Below is an exhaustive list of networks and platforms in Bangalore:
INITIATIVE FORMAT VALUE PROPOSITION WEBSITE
Ennovent Community Ennovent network : online networking community for sharing resources, expertise and experience between entrepreneurs, experts, mentors and investors
More than 5’000 members including more than 2000 entrepreneurs coming from over 200 countries
http://www.ennovent.com/community
Ennovent Circle: Community of entrepreneurs, investors, mentors and experts pursuing the objectives to source, mentor, invest in and scale businesses in low-income markets
Ennovent Pool: resources to accelerate entrepreneurship in low-income markets.
WEConnect International
Community Inclusion program pursuing the goal of building sustainable communities empowering women owned business enterprises
More than 300 women owned business enterprises reached so far (initiated in India in 2011)
http://weconnectinternational.org/en/
67
http://tie.org/about-us/
65
Jaaga Community Artistic community providing space to startups, artists, designers and activits (co-working space)
http://jaaga.in/
4Startups Community Free platform of discussions dedicated to startups
Hosted each first Saturday of every month by IIMB
http://www.4startups.in/?page_id=16
Startup weekend Competition and Network
1-Weekend platform to share ideas, form teams, build products, and launch startups
http://bangalore.startupweekend.org/
In50hours Competition and Network
Bring ideas to life over 1-weekend platform lasting 50 hours
http://www.in50hrs.com/
Seedstars World Competition and Network
Pitch in front of local and international jury with possibility to go to Switzerland for the final (gathering all the world winners)
http://www.seedstarsworld.com/event/seedstars-bangalore-2015/
Sankalp Summit Event Largest worldwide event related to social enterprises
More than 1’000 people: policy makers, experts, professors, etc.
http://www.sankalpforum.com/summit-1/
Construkt Festival
Festival Multi-days event about the future of entrepreneurship and disruptive innovations
http://construkt.me/
Sankalp Forum Forum Initiatives that promote high-impact social enterprises for inclusion
Year-round initiatives for communities of stakeholders
http://www.sankalpforum.com/
YourStory Media Online media platform dedicated to startups and entrepreneurs related stories, news, resources and research reports
http://yourstory.com/
Silicon India Media Online media platform focused on professional networking and news about business and technology
http://www.siliconindia.com/
TiE Bangalore Network Global network of entrepreneurs pursuing the goal of ‘fostering entrepreneurship globally’ by nurturing the next generations of entrepreneurs to come
In India: 17 chapters with more than 15’000 members
http://bangalore.tie.org/
National Entrepreneurship Network (NEN)
Network Support high-growth entrepreneurs with the purpose of job creation and economic growth for India: goal of creating half a million jobs till 2017.
Over 70’000 members located in 30 cities and partnership with more than 450 top-tier academic institutes in India
http://nenglobal.org/
66
Annual event called
“Entrepreneurship Week
India”: raising awareness
about entrepreneurship and
playing therefore a key role for
promoting an entrepreneurial
culture in India
Headstart Network
Network Monthly startup Saturdays gathering entrepreneurs and aspiring ones for discussions and sharing experiences
http://headstart.in/
Open Coffee Club Bangalore
Network Community connecting entrepreneurs, media, investors and other passionate and interested stakeholders (consultants, advisors, etc.)
http://occbangalore.org/
Figure 18 – Networks and platforms (main source: Sulochana Development Trust,
2014)
4.3.3 Government & regulation
It remains a huge challenge for the government to encourage entrepreneurship and innovation
outside IT in India, more especially in Bangalore, the IT capital of India. Indeed, Bangalore can be
considered as a leading hub of IT because of supporting policy initiatives over the last decades
(from the Government of India and the Government of Karnataka). The Government of Karnataka
also participated to facilitate capital sources to entrepreneurs by managing three venture capitalists
funds – Karnataka Information Technology Venture Capital Fund or KITVEN (now liquidated),
KITVEN Fund 2 (dedicated to the ventures’ funding in IT, biotechnology and nanotechnology) and
Karnataka Venture Capital Fund (KARVEN). (Sulochana Development Trust, 2014, p. 26)
However, the potential for the ventures to go global from India remained limited for the simple
reason that non-supportive regulation generally hinders the foreign investments and M&A activities
in India (Lauder Institute Global Knowledge Lab, 2012).
On a regional level, the State of Karnataka was the first Indian state to make an information
technology policy in 1997, whose outcome was the creation of the International Institute of
Information Technology in Bangalore (IIIT-B), which became along the years a key research center
(Parthasarathy, 2010).
In 2013, the Government of Karnataka announced measures to spur entrepreneurship and launch
incubators. A group under the name Karnataka ICT Group 2020 has proposed to extend the city to
67
two new IT satellite towns in and around Bangalore, in order to improve the infrastructure for the
needs of the innovation ecosystem.
In 2013 NASSCOM launched a national initiative called “10,000 Startups” aiming to enable
incubation, funding, mentoring and others for 10,000 technology startups in India over the next ten
years. It is the India's largest platform for technology startups connecting all the players in the
ecosystem. NASSCOM will shortlist the tech companies with a product focus (either software or a
combination of hardware and software). 68
The State of Karnataka set up the first startup warehouse
in Bangalore (part of the initiative), in order to enable early stage startups to interact and connect
together. The facility is 10,000 sq. ft. big. (Sulochana Development Trust, 2014, pp. 26-27)
Furthermore, the State of Karnataka also announced a new IT policy (Karnataka i4 Policy), in order
to make Bangalore attractive again for global investments in IT/ITeS/BPO sectors. It also
announced its intent to focus on other innovation-based areas (Sulochana Development Trust, 2014,
p. 27). Therefore, there is optimism beyond those announcements, even though as some of my
experts told me, there is not much to wait from the State government in general. Professor Krishnan
pointed out that so far none of those announcements made had been yet put into practice.
It is also said that starting a new business in India is not simple: “India is currently listed 142nd,
with Singapore is No1 according to ease of doing business.” (YourStory, 2015; cited by Harshith
Mallya, personal communication, June 17, 2015) However, the procedures have been relaxed in
merging five forms into an integrated electronic application form under the name INC 29 (for
registering one person, private, public and producer companies).69
4.3.4 Universities & education
In Bangalore, there are a plenty of engineering institutes and business schools. They have
contributed to produce “[…] higher pool of more skilled tech talent in the form of engineers and
coders […]” and provide those talented students to the IT services oriented companies, which in
turn have made Bangalore famous as IT services worldwide hub. (Harshith Mallya, personal
communication, June 17, 2015).
68
http://10000startups.com/ 69
http://yourstory.com/2015/05/new-business-made-easier/
68
However, Professor Krishnan also underscores the low availability of skilled manpower in the
software industry: “Though India produces hundreds of thousands of engineers who are potentially
employees of the software industry, the fraction of these engineers who the industry considers
appropriate for employment is a quarter to a third.” (Krishnan, 2010, Kindle Locations 136-138)
Furthermore, even though over 100 accredited universities receive funding from the Government of
India to incubate technology startups, there is still a lack of support provided to the startups
(mentoring and financial support to enter the market). Some of the experts also explained me the
relationships between university R&D and startups are underdeveloped, so that the innovation
coming from India’s higher education institutes is often not well supported and unluckily not valued
commercially later on.
Below is a non-exhaustive list of institutes located out of Bangalore (five out of a list of more than
fifty institutes in the fields of science, engineering and management):
INSTITUTE TYPE/AREA VALUE PROPOSITION WEBSITE
Indian Institute of Science (IISc)
Science Founded in 1909
Premier institute for advanced scientific and
technological research and education in India
39 departments, units, or research centres, 3500 students, and about 500 academic and scientific staff
http://www.iisc.ernet.in/
Indian Institute of Management
Business Founded in 1973
Leading international post-graduate centre of
management studies
Satisfies international standards (Equis accredited)
Only Indian business school to feature in the Financial
Times Executive Education 2015 Top 50 Rankings
IIMB has 150+ faculty members
http://www.iimb.ernet.in/
MS Ramaiah Institute of Technology
Engineering Founded in 1962
One of India’s best engineering school
Produced 35,000 engineering professionals
http://www.msrit.edu/
PES University Engineering, Medicine, Management and Life Sciences
Founded in 1972
18,000+ students, 4 campuses
http://www.pes.edu/
International Institute of Information Technology
Information
Technology
Founded in 1999
Focus on education and research, entrepreneurship and
innovation
Partnerships with the corporate sector
http://www.iiitb.ac.in/
Figure 19 - Institutes (main source: Wikipedia, 2015)
69
4.3.5 Incubators & accelerators
For a few years back, incubators and accelerators have enhanced their support provided to the
entrepreneurs and startups with a large range of services: mentoring, networking, advising and
funding. However, they have mainly followed Silicon Valley’s and should rather more
contextualize their programs to local conditions of entrepreneurs and startups here in India (Tej
Pochiraju, personal communication, June 24, 2015).
Most of those incubators and accelerators are private and market-oriented, so that they really want
their cohort to reach global success and in turn gain a significant return on investment by cashing
out their investments (Lauder Institute Global Knowledge Lab, 2012). They have positively
impacted the startup ecosystem since the access to early stage capital has increased very much over
time. Professor Ghose told me he does not think, however, that incubators and accelerators are
game changers, but it is something which just helps entrepreneurs. It is reported that “58% of
incubator and accelerator-backed startups die in the first 18 months of operation” (Mukund Rajan,
Microsoft Accelerator; cited by Lauder Institute Global Knowledge Lab, 2012, p. 18), so that those
stakeholder are also a good way for startups to prove themselves they are disruptive or radical
enough to succeed.
Suhas Gurumurthy explained me the key role that incubators and accelerators have to play within
the startups ecosystem of Bangalore for helping startups to reach out their potential:
Just as many startups are popping up, there are organizations which are inching to get these
start-ups right from space to mentoring till they get funded. There are many programs run
across the city to promote the growth of start-ups and these are the hot-spots for the
investors and accelerators alike. Monthly events such as Houseofgenius, TechHub and
4Startup, festivals such as Construkt facilitate the connections not only between the startups
to collaborate but also to showcase their capabilities and also get funded. (Suhas
Gurumurthy, personal communication, June 15, 2015)
Below is an exhaustive list of incubators located out of Bangalore:
INITIATIVE VALUE PROPOSITION WEBSITE
Angel Prime
Focus on startups that require seed-stage funding and mentoring to reach the early stage for a large venture investment
http://www.angelprime.com/
70
Bangalore Alpha Lab
Shared space for start-ups
Offer mentorship and connections (design, accountant and legal partners)
http://bangalorealphalab.in/
Cobalt BLR Meeting and coworking space http://www.cobaltblr.com/
Excubator Range of services addressed to startups going from
mentoring to early market access support
Offer services for other startup ecosystem builders
http://excubator.org/
Global INcubation SERVices (Ginserv)
Technology business incubator
Co-working space
regular events for the start-up community
http://www.ginserv.in/
IIIT-Bangalore Innovation Centre
Incubators attached to an academic institution http://www.iiitb.ac.in/innovation
Jaaga Co-working space and community http://jaaga.in/
Khosla Labs Seed Fund to support start-ups that build applications
based on the Aadhar platform -
https://resident.uidai.net.in/aadhaar-services
http://www.khoslalabs.com/
Lounge47 Advice to start-ups from both marketing as well as
technology perspectives and help startups finding
funding
Regular talks and sessions for the start-up community
http://www.lounge47.in/
Myntra Fashion Incubator
Incubator dedicated to fashion design
The first batch started in January 2015.
http://www.myntrafashionincubator.com/
Nasscom 10000 Start-ups
Provide funding, mentorship and developer software
9000 applications, 800 shortlisted and 150 impacted
http://10000startups.com/
NSRCEL, IIM Bangalore
Institution-led incubator offering office services and
space
http://www.nsrcel.org/
Tata Elxsi Offer a range of services: technical consulting,
mentorship, access to service providers, working space
and networking/connections
http://www.tataelxsi.com/services/incubate/home.html
TechHub Bangalore
Community and workspace for tech entrepreneurs
Regular demo days for startups to get feedback
https://bangalore.techhub.com/
Figure 20 - Incubators in Bangalore (main source: Padmanabhan, 2014)
Below is an exhaustive list of accelerators located out of Bangalore:
INITIATIVE VALUE PROPOSITION WEBSITE
Axilor Focus on execution (market traction)
Help with acceleration, early-stage funding and entrepreneurship in residence.
http://www.axilor.com/
GSF
Drive innovation and entrepreneurship through angel and seed investments.
http://www.gsfindia.com/accelerator/
71
Kyron Mentor entrepreneurs and develop their ideas towards building successful ventures within 4 months.
http://kyron.me/
Microsoft Ventures
A popular programme that many see as getting better with each batch. Start-ups in this programme benefit from Microsoft's extensive business connections.
https://www.microsoftventures.com/locations/bangalore
Target Accelerator designed to help early stage startups related to
Target’s business (retail industry).
5 startups were part of the first batch in January 2014
https://corporate.target.com/India/about/Target-Accelerator-Program
The Startup Centre
Specific accelerator addressing tech startups http://www.thestartupcentre.com/
Tlabs
Accelerator and early stage seed-fund dedicated to Indian
internet and mobile technology startups
65% companies have been funded
http://tlabs.in/
Figure 21 - Accelerators in Bangalore (main source: Padmanabhan, 2014)
4.3.6 Funding & capital sources
In 2014, Bangalore was ranked 5th
worldwide in a list of cities regarding the investments of venture
capital which had reached $2.6 billion, compared to San Francisco ($13 billion of VC investments),
Beijing ($6.4 billion), New York ($5.7 billion) and Palo Alto ($3.2 billion)70
. The conditions of
capital sources are improving: There are more incubators and accelerators, business angels and
venture capitalists. Therefore, startups have more opportunities to raise capital to fund their
business.
However, the exit environment in India is challenging and has a negative impact on the startup
ecosystem. There are still unexperienced investors who are not used to understand the innovation
ecosystem and the different stages a startup goes through, so that they cannot provide startups with
an adequate expertise and support them to thrive. Since the venture capitalists are not able to make
their investments viable enough, they are in turn very demanding regarding the term sheet and their
return expectations are very high compared to investing return benchmarks, “[…] even after
accounting for emerging markets risk premium[…]” (Sulochana Development Trust, 2014, p. 146).
Many entrepreneurs and investors have therefore decided to launch incubators and accelerators for
providing entrepreneurs with funding at more acceptable terms, while supporting them better.
(Lauder Institute Global Knowledge Lab, 2012)
70
http://timesofindia.indiatimes.com/business/india-business/Bengaluru-stands-tall-with-2-6-billion-venture-capital/articleshow/45974103.cms
72
It is also interesting to underline that since there is a short supply of capital investors, they are more
likely to take a stake in service-led startups rather over product-led startups. They will reach a better
trade-off: lower investment amounts but less risky and higher chance to grow fast and global.
4.4 SWOT
Helpful Harmful
Internal Origin
Geographical location
Passionate and dynamic entrepreneurs
Top educational institutions like IISc and IIM
Huge high-skilled and tech talent (human capital)
An open and meritocratic system
Huge and self-sufficient domestic market
Low-cost place
Frugal innovation (do a lot with few resources)
Capital sources
Reduced entry barriers in markets related to
mobile apps and cloud
Abundance of jobs in corporates (reduces risk for
entrepreneurs) (Tej Pochiraju, personal
communication, June 24, 2015)
Local adaptation in the service industry of
product innovations coming from Silicon Valley
Absence of real product development talent -
Silicon Valley, without really innovating (Tej
Pochiraju, personal communication, June 24,
2015)
Structured and specialized level of mentoring is
still missing
R&D/High tech relatively low
Poor physical infrastructure
Stifling regulation (Jai Asundi, personal
communication, June 27, 2015)
Limited pool of visionaries/fools/impact
entrepreneurs (Tej Pochiraju, personal
communication, June 24, 2015)
External Origin
Huge and growing domestic market: Indian
economy is going to double in the next 10 years
from 2 to 4 trillion (Govind Shivkumar, personal
communication, June 22, 2015)
Many challenges to overcome induces a lot of
opportunities (mostly with low tech)
More originality and novelty (radical or market
innovation)
Structure and specialize the level of mentoring
(support systems, facilitators, etc.)
Global knowledge availability (Jai Asundi,
personal communication, June 27, 2015)
Changing environment and entry of VCs (Jai
Asundi, personal communication, June 27, 2015)
Global competition with other startup
ecosystems
No rehabilitation of infrastructures
No supportive regulations and incentives from
the government
73
5. Silicon Valley vs. Bangalore: Comparative discussion
5.1 Similarities
5.1.1 Origins: military contracts, technology institutes and big companies71
For both of innovation ecosystems, military contracts and defense have triggered inception of their
innovation processes and industry. In United States and especially Silicon Valley, “US Government
channeled resources to universities (e.g. MIT, Stanford) to develop technologies for the Second
WW and Cold War. These resources were the seeds of developing an innovation ecosystem.”
(Annalee Saxenian; cited by Lauder Institute Global Knowledge Lab, 2012, p. 11) Venture capital
replaced military contracts to serve as new and main source of capital for fostering innovation and
startups particularly. Venture capitalists were previously successful and experienced entrepreneurs.
When coming to the Valley, they brought to the startup ecosystem their competences and resources
going from technical expertise, networks and capital. (Lauder Institute Global Knowledge Lab,
2012, p. 11) In Bangalore, the development and funding of Indian defense establishments (Indian
Space Research Organization and Hindustan Aeronautics Limited) laid initial foundations of tech-
boom in the city by developing an innovation ecosystem of diverse actors (public sector, private
sector and institutes). However, as Mauktik Kulkarni (personal communication, June 14, 2015)
explained to me: “Defense investment by the government was always there, but this didn’t
necessarily spawn a huge domestic private defense industry because of government regulations”
Moreover, the technology institutes in Bangalore (like the Indian Institute of Science and the
University Visvesvaraya College of Engineering) have been drivers of India’s IT revolution by
educating plenty of Indians to engineering and fostering innovation. Stanford did the same in
Silicon Valley but with more success since they had already benefited much more from past
synergies with the US Defense.
Finally, big companies (like Infosys and Wipro) completed the innovation ecosystem by offering
their employees with experience and expertise, and by inspiring them and others to replicate their
71
http://trak.in/tags/business/2011/09/21/london-bangalore-silicon-valley-next-technology-hub/
74
corporate success. In Silicon Valley, the same comparable phenomenon has been observed with
companies like HP, Intel or Apple more recently.
5.1.2 Talent
Alisée de Tonnac told me that it was during her world trip that she realized “talent is everywhere”.
However, not for the same reasons, both in Silicon Valley and in Bangalore there is a vast
imbalance between the skills.
In Silicon Valley, since it is not always easy for companies to recruit highly-skilled workers on-site
(plenty of high-tech startups), a lot of money is spent to attract residents and expats based out of the
Bay for fulfilling the needs and requirements of the startups (Lee, Miller, Hancock and Rowen,
2000, p. 55). There is a dense job market and many hiring companies manage a high flow of
candidates, even though it is not always easy for all the high tech startups to fill their positions very
fast. Those startups are generally ready to dedicate enough financial resources compared to
Bangalore, in order to acquire the best talent. It is the reason why there is a “strong employment
liquidity [and that] good candidates are never unemployed for very long” (Rich Mironov, personal
communication, June 7, 2015).
In Bangalore, there is rather an overflow of human resources exiting each year from numerous
institutes of the city, so that huge issues for the startups and companies lies on the ability to identify
really competent people among masses of engineers available in labour market. There are so many
institutes in Bangalore and so many engineers in turn exiting them each year. However, Mauktik
Kulkarni (personal communication, June 14, 2015) explained that startups have huge difficulties to
recruit talent “[…] because the concept of a ‘stable job’ is still way more important in the Indian
society than the risk associated with a startup job.” Therefore, startups are generally either losing
time and/or money (they don’t really have) in hiring talent or they do not lose time and money but
bypass talent.
75
5.1.3 Media and visibility
Both ecosystems, Silicon Valley and Bangalore, are very good at organizing events, meet-ups and
workshops, and at hosting incubators. Many communities do exist as well around each ecosystem
like circles, communities, Facebook/Twitter/LinkedIn groups, online journals, etc. All this
ecosystem of media, networks and platforms then contributes to increase the density of
entrepreneurial interactions in the ecosystem, which in turn enhances the opportunities for
entrepreneurs to pool their ideas together and to go forward with their business.
Their respective online Journal focus on innovation and entrepreneurship:
- YourStory (India; particular focus on Bangalore): India’s best online platform for
entrepreneurs having so far profiled over 15,000 entrepreneurs and provided networking
opportunities to over 50,000 entrepreneurs through conferences and meetups.72
- Silicon Valley Business Journal (Silicon Valley): Silicon Valley’s platform for breaking
business news of 17 industries and weekly top stories from Silicon Valley.73
5.2 Differences
5.2.1 Entrepreneurial culture and community
Culture is determined by history and cultural values (Aditya Ghose, personal communication, June
12, 2015). Indians are quite family-oriented while in the United States people are more
individualistic. In Bangalore you will be more stigmatized by the community after failure (Ajay
Bam, personal communication, June 5, 2015) so that there is a high fear of failure for the
entrepreneurs and investors compared to Silicon Valley where, as Alisée de Tonnac explained me,
the failure is very well valued by the investors: “If an entrepreneur has not failed once, I will not
invest”. She told me it is in the mindset there to state that an entrepreneur having failed becomes
more experimented than an entrepreneur having never failed because the success is the result of
successive failures that have brought someone to success. Rich Mironov (personal communication,
June 7, 2015) to sum up: “If social pressure makes failure too expensive or career-risky, then folks
are too strongly disincentived from trying new ideas/products”.
72
http://yourstory.com/our-story/ 73
http://www.bizjournals.com/sanjose/about-us/
76
As explained earlier, in Silicon Valley, the culture is an important feature leading entrepreneurs to
success: there results an open-minded, collaborative, risk-taking, Pay-It-Forward and knit
community. In Bangalore, there is “a thriving community but not as closely knit or advanced as
Silicon Valley: People are generally not very open to helping each other.” (Harshith Mallya,
personal communication, June 17, 2015)
Professor Ghose evoked another difference between the American and Indian entrepreneurial
culture: the system of value or Maslow’s hierarchy of needs. He underlined the fact there is also a
cultural difference between both the American and Indian societies in terms of motivational and
aspirational values. In America, kids generally grow up in a relatively prospere and safe place while
in India they do not grow up in such a comfortable place and then are more likely to strive to get a
better life. He spoke about “hungry masses” as aspirational classes who are really motivated and
hard-working to succeed and become successful. On the opposite, in Silicon Valley, entrepreneurs
will be more driven to succeed for a self-actualization reason mainly, which means the
entrepreneurs there generally have the desire of self-fulfillment, in the sense they want to be capable
of accomplishing what they can potentially do. Professor Ghose made the analogy between India
and America with the generations of migrants. The first ones are very hungry to be successful for
fulfilling the bottom of Maslow's hierarchy of needs, while the next following generations start to
satisfy themselves with the economic achievement of their parents and have less hunger to strive to
be successful except for accomplishing the top of Maslow's hierarchy of needs.
Furthermore, in Bangalore, the degree of specialization, partnerships and integration is
comparatively lower. The companies don’t really try to collaborate and outsource with each other
according to their respective specializations as compared to startups in Silicon Valley, which really
help and support each other to go forward and succeed.
Finally, Harshith Mallya explained me that there was another cultural and entrepreneurial difference
between Silicon Valley and Bangalore with regard to the financial and human resources available:
Silicon Valley have more financial resources to ‘burn’ to figure out what works best while in
Bangalore, there is a greater pool of engineering talent but limited financial resources.
People who fail to meet challenges at work are replaced by others, as there is no limit of
talent, while jobs are comparatively hard to find. So it makes people work fast and employ
quick fixes. (Harshith Mallya, personal communication, June 17, 2015)
77
5.2.2 Role models
Silicon Valley has some great advantages of having seen several blooming successful entrepreneurs
and success stories within the ecosystem. High-impact entrepreneurs play crucial role of mentors by
having a societal impact towards the young generations of budding entrepreneurs. Professor Ghose
spoke about the role model, which gives personal aspirations to people and benchmark themselves
against. People like Bill Gates, Steve Jobs, Mark Zuckerberg, Larry Page and others, with their
companies Microsoft, Apple, Facebook, Google and others inspired a young generation of
entrepreneurs in Silicon Valley and are still inspiring new ones to come. Silicon Valley has been
very good at marketing. Alisée de Tonnac shared with me the following observation:
Why Silicon has been so good is they are also very good in marketing it. So when there is a
start, everyone knows about it. And the more people know about it, the more you have a role
model, you have aspirations and the young generation wants to become that. […] It is so
clear in sport […]
On the opposite, in Bangalore, since the startup ecosystem is very young, there has been not such a
heritage with inspiring people and models. Many Indians feel more inspired by Silicon Valley than
by their own startup ecosystem as most of my experts shared during the interviews. Dr. Srinivas
Padmanabhuni (personal communication, June 15, 2015) also explained me the importance of social
recognition in India and told me that “emphasis for degree is very high in India” so that people first
think about getting a degree before eventually considering to become an entrepreneur and follow
aspirations. He also added there is not the same glorification for entrepreneurship here in India as it
is in the United States, since the people here in India, especially students exiting MBAs, are
generally more glorified by earning high salaries in established companies than by earning low
salaries in startups. He agreed it is changing now since newspapers and media outlets started to
speak a few years ago about successful entrepreneurs and startup stories.
5.2.3 Innovation flows and type of reach
The world ecosystems create themselves and evolve in different ways, so that there is going to be
according to Alisée de Tonnac a kind of specialization in different hubs. Many of my experts agreed
with the idea there is a specialization of startup ecosystem like here in Bangalore it more about IT
services, but as Sartaj Anand defended nothing can hinder anyone to innovate in a specific area in
any startup ecosystem as long as there the entrepreneur can have access to enough support to drive
78
the idea into business development. He explained me that certain products and services emerge in
certain startup ecosystems because there is a need for it. He doesn’t buy the idea of startup
ecosystem clustering which would require a certain degree of maturity and exchanges between the
ecosystems. Even though that there are best places for some activities (e.g. Bangalore for IT
services, Shenzen for manufacturing activities, etc.), diverse products, services and processes will
always emerge from everywhere since we are running under free market. Similarly, Professor
Krishnan (personal communication, June 10, 2015) explained me that Bangalore’s startup
ecosystem has a certain carrying capacity. Some people are thinking as follows: “Could Bangalore
have a focus on certain activities?” There is going to have a point that will make the ecosystem no
more viable for a startup to make it in the city.
Sartaj Anand (personal communication, June 10, 2015) explained the influence of US on India’s
innovations: “We have this cultural issue that everything coming from the US is good, is awesome.”
The innovation flows will continue to come from Silicon Valley”. Sartaj doesn’t see Bangalore
pushing innovations to US, but rather think there will opposite happening. Jai Asundi (personal
communication, June 27, 2015) added another observation to Sartaj’s assertion by differentiating
the reach of both startup ecosystems, arguing that Silicon Valley has a global reach while Bangalore
has more of an Indian outlook. Therefore, Silicon Valley’s startups are mainly focusing on world
market and global market opportunities, while Bangalore’s startups generally focus largely on
domestic market opportunities. Alizée de Tonnac indeed confessed to me that “the beauty of India
is the market is big enough”. The market opportunities are huge because the challenges are huge as
well.
Furthermore, Alisée de Tonnac explained to me that five years ago the best paid jobs were the
developers and now it is going to be designers. She thinks, like other experts, because of the global
influence of Silicon Valley, this phenomenon maybe will go global. For instance, she gave me a
very good example concerning lean designed websites vs. locally designed websites in Asia. It is
true there is a huge difference with India where there are many pop-ups and colours. Alisée told me
many places over the globe would adopt standards of Silicon Valley while some place will keep
their own local standards. In that case, local innovation plays a key role in defining standards out of
design thinking.
79
5.2.4 Types of innovation: Low tech vs. high tech
Bangalore is known as capital city of IT services, while Silicon Valley is more recognized for its
cutting-edge startups and companies because of the large availability of resources comparatively.
Harshith Mallya (personal communication, June 17, 2015) described the dichotomy between Silicon
Valley and Bangalore (encompassing the Asian economies in general) as follows: “While Silicon
Valley has more thinkers, innovators, Asian economies currently have the engineering talent who
can put ideas into motion.” Rich Mironov (personal communication, June 7, 2015) shared the same
observation, arguing that Bangalore’s innovations are generally more related to delivery and
process innovations while Silicon Valley’s innovations refer to global market innovations.
Therefore, the financial resources are indeed essential to high tech innovation as Mauktik Kulkarni
(personal communication, June 14, 2015) underlined and it is the reason why Silicon Valley excel
so well in doing it: “Due to availability of huge amounts of risk capital, companies can experiment
with electric cars (Tesla), 3D printing and game-changing healthcare innovations (drug
development, devices, etc.).”
5.2.5 Lean startup methodology
Lean startup methodology is pretty much applied today in Silicon Valley where there are plenty of
entrepreneurs who are familiar with the principles of the methodology. They understand the
importance to pivot their business model while testing their start hypothesis to their market segment
in order to reach a minimum prototype viable (MVP) for validating their market. The methodology
has even been exported into emerging startup ecosystems through workshops and meetups; e.g.
Lean startup circles
Some of my exports agreed to say there are many entrepreneurs in Bangalore who do not question
themselves very much about their product development and their market validation, compared to
Silicon Valley where much time is spent on that part with through iterations of the business model.
Rich Mironov explained there is a difference of approach because of the difference of technology
industry focus in general (taking into account the whole innovation ecosystem of Bangalore
including the large companies):
Hugest portion of tech in Bangalore is contract development or outsourced support. This is
not innovative in a product sense: strategy and market requirements are determined far
80
away. Success / failure of outcomes revert to the client, not the local Bangalore team. This
encourages an "order-taking" model where local teams build things but don't own those
things or their market outcomes. (Rich Mironov, personal communication, June 7, 2015)
Tej Pochiraju also pointed out the difference between Silicon Valley and Bangalore as to
understand the needs and requirements of the customers for the startups when developing the
adequate product/service:
Silicon Valley has seen a lot of products being developed and shipped. There are more
people who understand product development and the close links to market development. The
domination of services industry in Bangalore has led to a large number of skilled engineers
but without an understanding of market development/research. Developing a product relies
on an ability to understand 'needs' of the target market and translate these into product
features. More often than not these are not documented and hence the founder/architect
plays a key role in the translation. On the other hand, service industries thrive on
documented requirements specifications. The developer has to meet these specifications but
does not have to understand the needs or validate his 'features' in the market - the clients do
that. Not all developers from a service background are able to make the step up to product
development in startups where they have to understand the needs themselves. (Tej Pochiraju,
personal communication, June 24, 2015)
Prateek Khare (personal communication, June 4, 2015) also put forward that the difference between
Silicon Valley and Bangalore was that here in India people look for the solution while in US people
look for the process; how they reach the solution.
5.2.6 Quality of support to startups
In India, there is still a lack of structured mentoring networks, in order to support the startups
according to the specificities of their needs and requirements.
[…] if I want to build a product, an app, a social gaming app like Angry Birds today – if I
start, I need to have support systems, organizations, facilitators, or some guys whom I can
just go and bounce my idea [off]. So that evolved, very structured level of mentoring is still
very much missing in India… (Shradha Sharma, cited by Newman, 2012)
81
Concerning the experience of talent in the startups, Rich Mironov raised up the fact saying that it is
pretty easy to move from project/firm to project/firm in Silicon Valley thanks to deep talent’s
expertise/specialization and ability to move.
When I form a new startup in Silicon Valley, I can pull together expert architects,
developers, technical writers, product managers, marketers, experienced sales teams, etc.
Everyone can have deep previous experience doing their special thing. Otherwise, we have
a collection of newbies who all need to learn from scratch. (Rich Mironov, ersonal
communication, June 7, 2015)
5.2.7 IP protection
Some experts also pointed out the IP problem here in India compared to US where there is a
“Strong intellectual property laws and good enforcement” (Mauktik Kulkarni, personal
communication, June 14, 2015). The federal and California state has actively supported the startup
ecosystem by giving tax breaks and developing a strong IP regime, while here in India there is a
less supportive regulatory environment for entrepreneurs and investors in the sense that the
government is quite inactive in terms of predictable and supportive regulations for IP protection.
Moreover, there also exists a problem of uniformity and predictability of the law system as to
dealing with IP:
Indian courts aren't uniform when it comes to developing jurisprudence around copyright
and patent infringement […] There is a high chance that a judge who doesn't understand the
details would give an injunction. Then the loss of six months, etc., can be quite expensive,
because in six months' time your competitor might eat into all of your market" (Sunil
Abraham, executive director of Bengaluru-based research organization Centre for Internet
and Society; cited by Fok and Aggarwal, 2015)
Therefore, one of the consequences for India is that if the tech startups want to have better chances
to attract investors, they should better incorporate their IP status abroad (e.g. Singapore, USA, etc.)
where the value of the IP would never be as high as in India:
Incorporation in a country like the US where potential for M&A is higher, especially for
core technology startups, will generally make it more attractive to potential buyers as it
avoids a lot of legal and financial paperwork. (Brij Bhasin, India investment-lead of
Japanese venture capital firm Rebright Partners; cited by Fok and Aggarwal, 2015)
82
Another consequence for India is that a very minimal amount of startups are willing to opt for high
tech and will rather innovate through low-tech, already patented technologies the can use cheaply:
Indian governments have done a great favor on the Indian ecosystem by not interfering
much with the startup ecosystem. But India has a long way to go before it can be called a
business friendly country. That is the reason why most of the ‘big’ Indian innovative
companies are registered outside of India […] Maybe that is the reason why the Bangalore
ecosystem is limited to areas that don’t require heavy investment in R&D or infrastructure.
Mauktik Kulkarni (personal communication, June 14, 2015)
5.2.8 Synergies with the education system
Dr. Srinivas Padmanabhuni (personal communication, June 15, 2015) told me there are two world-
class institutions in Bangalore: Indian Institute of Science, where “they have very theoretical roots
[and] they don’t want to do practical work”, and Indian Institute of Management, where “there the
basic culture [for the students] is about getting the highest paid jobs”. As conclusion, he said “it is
therefore really difficult to expect any good incubation to come out of IIM or IISC”. Moreover, as
Mauktik Kulkarni (personal communication, June 14, 2015) put forward: “Other than IIMB and
IISc, there were not too many world class academic institutes. Plus, these institutes were not
heavily interested in industry collaborations or spinning off start-ups.”
On the flipside, in Silicon Valley there have been interactions between the Stanford University and
the startup ecosystem since the inception of the whole innovation ecosystem. Stanford directly
contributed to provide first entrepreneurs, the technology to work on and the place to provide a
high-skilled tech talent to the startups. Many events and programs are hosted by the famous
institutions, in order to foster innovation and entrepreneurship in Silicon Valley.
5.2.9 Facilities and infrastructure: standard of living
A big advantage of Silicon Valley is certainly the distance to open spaces (contrary to Bangalore).
However, since the notoriety of Silicon Valley went out the borders of the USA, there have been
more and more expats coming in the ecosystem for launching their business, which resulted in a
deterioration of the quality of life. (Lee, Miller, Hancock and Rowen, 2000) Whereas the salaries
and job growth increased, cost of the resources (food, housing, etc.) and the conditions of living
(highway congestion, business competition, selective access to capital sources, etc.) became worse
83
over years. Glenn Kelman, CEO of Redfin – real estate listing website, explained the situation as
follows:
Folks are leaving Silicon Valley, mostly because they can't afford to stay. For the first time
ever, the median price for a Silicon Valley home just exceeded $1 million. That's about
double what it is in other tech cities, like Boston or Seattle, and triple what it is in aspiring
technology hubs, like Portland, Denver or Austin. (Glenn Kelman; cited by CNBC, 2015)
Payment, logistics, basic mobility, urban environment and infrastructure are still big systematic
issues India will have to deal with in the next decade, while Silicon Valley has not to deal with. In
India, because resources are limited it becomes a constraint for entrepreneurs. They lose time and
efficiency in their processes. However, it is important to consider that Bangalore offers huge cost
advantages resource-wise (human and physical). Bangalore emerged as one of the world's cheapest
cities to live in. Therefore, there is a very good trade-off to make as foreign entrepreneur in coming
here. Barbara Maim (personal communication, June 3, 2015), Swiss entrepreneur and Founder of
Minsh - social web and mobile application company based out of Bangalore, agreed with me. She
confessed she had first thought to go to Silicon Valley, but there it was just far too expensive to
start a business for identic capabilities with Bangalore. So, with her husband, she decided to
establish their business and now it is working pretty well. They absolutely did not regret their
choice of coming here. Alisée de Tonnac (personal communication, June 7, 2015) also put forward
that barriers to entry are very high however for entrepreneurs and investors at Silicon Valley: “It has
a price to be with the best”. She wanted to tell me that the fact of benefiting from the resources of a
startup ecosystem like Silicon Valley has to be more expensive comparatively to less performing,
and mature ecosystems like Bangalore. For seed-stage ventures, there is certainly a big advantage to
move and start in emerging startup ecosystems, while for early-stage and high-tech driven ventures
Silicon Valley is the place to be.
5.2.10 Funding environment
The funding environment in Silicon Valley is better, but Professor Krishnan does not think there is
a shortage of funding for Indian startups. According to him, it is necessary to consider the historical
context and the maturity of the startup ecosystem: the startup ecosystem is about 60 years old when
there was nothing comparable over the globe, while Bangalore is not more than 15-20 years old and
is still not mature. Some of the experts also told me that since United States is a rich and developed
country and India is still a developing country with limited financial resources, there are far less
84
capital sources available in India to startups than it is in America. Therefore, in Silicon Valley,
startups are able to raise large rounds of financing, while in Bangalore, even though during the past
years availability capital has improved very much, startups face difficulty to raise large rounds of
financing (Harshith Mallya, personal communication, June 17, 2015).
Alisée de Tonnac added that it is besides not in the Indian culture to make high-risk investments on
VC stage. Alisée and other experts like Govind Shivkumar and Sartaj Anand told me it is related to
the fact the investors are less reluctant to take risks because of the non-maturity of the ecosystem.
As Mauktik Kulkarni emphasized, “the availability of true risk capital is much lower compared to
the US.” (personal communication, June 14, 2015) Tej Pochiraju, Director at Jaaga startup, pointed
out the following exhaustive comparative observation between both startup ecosystems:
Bangalore is still a few years behind the Valley in maturity of the ecosystem. Not enough
good mentors or investors. Investors are still keen to invest in me-too/validated ideas. They
are happy taking execution risks (by betting on the team) but are unwilling to take business-
model risks (by betting on ideas). This will change as investment opportunities in me-toos
dry up. The term sheet defines the funding policy: Higher risks induce higher stake on the
capital. (Tej Pochiraju, personal communication, June 24, 2015)
Indian investors are therefore risk averse, but they are also less educated and less knowledgeable.
They require too much stake on capital, which in turn encourages fewer entrepreneurs to perform.
For those reasons, in India, as Shradha Sharma, Founder of YourStory, underlined, “[…] we still
have this mindset that unless you can show a market adoption, until you build that traction, you
don’t get money easily…. That’s why you’ve not seen a lot of innovation”74
Lastly, an important point Professor Krishnan (personal communication, June 10, 2015) enlightened
is the fact that in United States there are many people who found startups are the same who work in
the tech industry and have a deep understanding of the ecosystem. In India, most of the investors
are not successful entrepreneurs themselves, even though it is rapidly changing. In that sense, there
are numerous successful entrepreneurs who become investors as well. The Indian government could
also be a push but Professor Krishnan underlined the fact that there is already so much money
invested in other sectors like education, healthcare, e-governance, etc.
74
http://tech.co/india-startup-scene-shradha-sharma-2012-05
85
5.3 Performance and potential
During my research, I asked myself a question about performance. I wanted to come up with figures
and explain precisely the difference between two startup ecosystems. I finally decided to use the
Six-Factor Ecosystem Scorecard instead of losing myself in rankings, especially because the
difference between the maturity of the startup ecosystem of Silicon Valley and the emerging startup
ecosystem of Bangalore is huge in all domains – you can find statistics about rankings and more
specific figures from the Global Startup Ecosystem Index in the Appendix of my thesis.
Particularly, I represented each stakeholder and explain about the situations within the ecosystem
and take next my focus on the comparative analysis of the two ecosystems, in order to understand
where similarities and differences existed.
We all know that Silicon Valley is the reference when we speak about startups. By making the
comparison I wanted to highlight the following points:
- How can a startup ecosystem be successful in another region of the world (type/nature of
innovation and type of reach)? What are the criteria that make it possible?
- What is the influence of the leader (Silicon Valley) on the followers (Bangalore)?
- Where is Bangalore better than Silicon Valley? And vice-versa.
- And why is Silicon Valley’s best practice so hard to replicate elsewhere?
The experts I consulted believe that Bangalore cannot catch up Silicon Valley even in the coming
years. Sartaj Anand (personal communication, June 10, 2015) explained me about the existing
economical and systematical lag between Silicon Valley and other world startup ecosystems. There
will be always a gap, even though this will be shrunk over time according to him. Regarding
venture capitalists’ participation and entrepreneurial maturity, Sartaj however said that he really
thinks Bangalore will catch up and eventually reach Silicon Valley in another decade.
Regarding the potential of each startup ecosystem, many experts told me how they feel Silicon
Valley will stay number one worldwide, even though it is quite a possibility that very innovative
and competitive technology clusters appear in some regions of the world in years to come. There,
startups will continue to come up with radical / high tech innovations and design-based disruptive
innovation is believed to transform our current society processes one step further yet. Jai Asundi
(personal communication, June 27, 2015) told me that while “the entire environment is conducive to
innovation [in Silicon Valley], one finds innovation only in pockets [in Bangalore].” It means that
86
there are not all the supportive conditions in Bangalore to foster product innovation. However,
many experts told me there would still be a lot of potential for startups in the mobile technology,
since it enables to reach a larger part of the Indian population and therefore serves a bigger market
in order to increase the revenues. So, it will not inevitably be necessary to use high tech and
expensive technology innovations to answer those people, but process innovations and low cost
technology innovation will match the needs and requirements with a better cost/value trade-off.
While there are still many challenges to overcome in India with low technology applications, it is
therefore quite predictable that a significantly low number of high-tech innovations will be seen in
the years to come as compared to Silicon Valley’s high-tech innovations. Nevertheless, there are
three main steps Bangalore should realize in order to become a world class startup ecosystem
(Sulochana Development Trust, 2014, p. 35):
1. High-net-worth individuals should constitute an angel network
2. Entrepreneurs need have plans better articulated and a clear business model designed
3. Entrepreneurs also need to consider their impact; how their value proposition can make a
high impact (e.g. social impact in India)
Finally, there are two main reasons why Indian startups can remain optimistic as to their possibility
seizing opportunities and developing markets locally (Shradha Sharma, cited by Newman, 2012):
1. India has a huge population (more than 1.3 billion people) and there are plenty of different
needs to be satisfied. There is space for many actors and markets as well. Startups just need
to create something meaningful and affordable. Even though, the revenue per unit will be
low, the overheads will be balanced by the huge volume.
2. They are good at doing Jugaad (do a lot with a few). Even though, the startup ecosystem has
not so effective processes, Indians will find their way to figure it out and to innovate under
constraints. Western startups, even though reflect a trend to make reverse innovation in large
companies, are not used to work with limited resources and constraints.
87
6. Conclusion
The startup ecosystems of both Silicon Valley and Bangalore depict similarities and differences in
the way they are organized, their respective stakeholders are developed and interaction between
them. Each startup ecosystem has its own identity for a simple reason as we speak about two
different cultures and socio-economic regions: United States and India.
In India, there is a strong spirit of frugal innovation originating from “Jugaad”. This spirit of
creation is embedded in most of the startups of the ecosystem of Bangalore, whether they copy and
adapt locally existing business model (e.g. Amazon, Whatsapp, etc.) or they disrupt and address
unserved or underserved markets by using new or existing technologies. The reason why we can
speak about frugal innovation is that ventures and companies have to deal with a fact that the
resources are limited in India and there is a huge part of the Indian population which aspires to
modern goods and services but has limited affordability. On the contrary, in America, startups
specifically focus on high tech innovation since the resources are unlimited. Moreover design
thinking became a very famous approach to innovation in Silicon Valley and elsewhere, too. Many
ventures have been inspired by this approach to innovate by rethinking on existing business models
/ markets, so that they come up with completely disruptive business models addressing with
success, needs and requirements of customers.
Innovation-wise, I understood through my research that there was a real dichotomy of approach
between Silicon Valley and Bangalore. Professor Krishnan (personal communication, June 10,
2015) made the following observation during our interview: “Silicon Valley is more focused on
building the technology and Indian startups are more focused on using the technology.” In Silicon
Valley, the entrepreneurs try to dynamically change and inspire the world without any consideration
for risk taking. They want to be high-impact entrepreneurs and answer global challenges, while in
Bangalore the entrepreneurs are more risk averse, which is partly why they first look for
overcoming their local challenges before thinking to go global. Anyway, a great advantage and
disadvantage at the same time in India is that ventures have enough market to address because of
the huge population of the country, but they miss out the opportunity of becoming global success
stories like Facebook, Whatsapp, Twitter, etc.
88
In the comparison of Silicon Valley versus Bangalore, I explained why product innovations and
high-tech innovations are still neglected in Bangalore by most of the startups as possible global
business opportunities:
Risk averse and rather non-collaborative entrepreneurial culture;
Not a lot of role models yet to get inspired from;
Expertise in process innovation based on the IT service industry (BPO / software industry)
but lack of product / market development (lean startup);
Lack of structured and supportive mentoring networks;
Low synergies with the education system for fostering technology transfers;
Unsupportive and unpredictable IP protection ;
Non-mature funding environment avoiding high-risk investments.
89
7. References
7.1 Works
Bannerjee, K., Bannerjee, S. and Sastry P. R. (2014). Start-up City: Ten Tales of Exceptional
Entrepreneurship from Bangalore's Software Miracle. Collins Business.
Bay Area Council Economic Institute (2012). Technology Works: High-Tech Employment and
Wages in the United States. Retrieved from:
http://www.bayareaeconomy.org/media/files/pdf/TechReport.pdf
Bessant, J. R., and Tidd, J. (2011). Innovation and Entrepreneurship. Hoboken, NJ: Wiley.
Biradavolu, Monica Rao (2008). Indian Entrepreneurs in Silicon Valley: The Making of a
Transnational Techno-capitalist Class. Amherst, NY: Cambria.
Boeckel, Mark, Sprunger, Brent, Smith, Kevin and Work, Emily (2012). Uber - How a technology
firm is changing the traditional transportation model.
Chatterji, A., Glaeser, E. and Kerr, W. (2014). Clusters of Entrepreneurship and Innovation.
Retrieved from: http://www.nber.org/chapters/c12943.pdf
Christensen, Clayton M. (1997). The Innovator's Dilemma: When New Technologies Cause Great
Firms to Fail. Boston, MA: Harvard Business School.
Dabholkar, V., and Rishikesha T. K. (2013). 8 Steps to Innovation: Going from Jugaad to
Excellence. Noida: Collins Business.
Drucker, Peter F. (1985). Innovation and Entrepreneurship: Practice and Principles. New York:
Harper & Row.
Durst, S. and Poutanen, P. (2013). Success factors of innovation ecosystems - Initial insights from a
literature review. Retrieved from:
http://blogs.helsinki.fi/pkpoutan/files/2014/03/Durst_Poutanen_CO_CREATE2013.pdf
Estrin, J. (2009). Closing the innovation gap: Reigniting the spark of creativity in a global
economy. McGrew Hill, New York.
European Commission (2011). A second chance for entrepreneurs: prevention of bankruptcy,
simplification of bankruptcy procedures, and support for a fresh start. Retrieved from:
http://ec.europa.eu/enterprise/policies/sme/business-
environment/files/second_chance_final_report_en.pdf
Gore, Amy and Mhatre, Pratik (2002). High Tech Cluster Economies: Bangalore, India and Silicon
Valley, USA.
90
Hwang, V. and Horowitt, G. (2012). The rainforest. Los Altos Hills, Calif.: Regenwald.
Kenney, M. (2000). Understanding Silicon Valley. Stanford, Calif.: Stanford University Press.
Krishnan, R. T. (2010). From Jugaad to Systematic Innovation: The Challenge for India.
Bangalore: Utpreraka Foundation.
Lauder Institute Global Knowledge Lab (2012). Far From Silicon Valley: The Entrepreneurial Gap
in Emerging Market. Retrieved from: http://lauder.wharton.upenn.edu/wp-
content/uploads/2015/06/The_Entrepreneurial_Gap_in_Emerging_Markets.pdf
Lee, C. (2000). The Silicon Valley edge. Stanford, Calif.: Stanford University Press.
Legrain, Philippe (2007). Immigrants: Your Country Needs Them. Princeton: Princeton UP.
Ley, T., Ruohonen, M., Laanpere, M., & Tatnall, A. (Eds.) (2012). Open and social technologies
for networked Learning. Springer Publishing Company, Incorporated.
Market Revolution (2014). Startup & The New Entrepreneurs. Retrieved from:
http://fr.slideshare.net/MarketRevolution/startup-the-new-entrepreneurs
Markusen, Ann R. (1991). The Rise of the Gunbelt: The Military Remapping of Industrial America.
New York: Oxford UP.
OECD (2013). Supporting Investment in Knowledge Capital, Growth and Innovation. Retrieved
from: http://www.oecdepublishing.org/multilingual-summaries/9789264193307-
sum/pdf/9789264193307-sum-en.pdf
Osterwalder A., Pigneur Y., Bernarda G. and Smith A. (2014), Value Proposition Design: How to
Create Products and Services Customers Want. John Wiley & Sons.
O'Sullivan, D., and Dooley, L. (2009). Applying Innovation. Thousand Oaks: Sage.
Parthasarathy, Balaji (2010). Envisioning the future in Bangalore. Seminar 612.
Phillips, M. (2013). Inside Silicon Valley: How the Deals Get Done.
Piscione, D. (2013). Secrets of Silicon Valley. New York: Palgrave Macmillan.
Prahalad, C. K. (2005). The fortune at the bottom of the pyramid : Eradicating poverty through
profits. Delhi, India : Wharton School Publishing.
Ritzer, G. and Atalay, Z. (2010). Readings in Globalization: Key Concepts and Major Debates.
John Wiley & Sons.
Rubens, N. et al. (2011). A Network Analysis of Investment Firms as Resource Routers in Chinese
Innovation Ecosystem, Journal of Software. 6(9), 1737–1745.
Saxenian, AnnaLee (1994). The Limits of Autarky: Regional Networks and Industrial Adaptation in
Silicon Valley and Route 128. Retrieved from:
http://people.ischool.berkeley.edu/~anno/Papers/limits_autarky.html
Saxenian, AnnaLee (2001). Bangalore: The Silicon Valley of Asia? Stanford University
91
Shavinina, Larisa V. (2003). The International Handbook on Innovation. Oxford: Pergamon.
Shelton, R. and Percival, D. PwC (2013). Breakthrough innovation and growth. Retrieved from
http://www.pwc.ch/user_content/editor/files/publ_adv/pwc_breakthrough_innovation_and_g
rowth_e.pdf
Stangler, D. and Bell-Masterson J. (2015). Measuring an Entrepreneurial Ecosystem. Journal SSRN
Electronic Journal. Retrieved from:
http://www.kauffman.org/~/media/kauffman_org/research%20reports%20and%20covers/20
15/03/measuring_an_entrepreneurial_ecosystem.pdf
Startup Genome (2012). Startup Ecosystem Report 2012. Retrieved from:
http://techcrunch.com/2012/11/20/startup-genome-ranks-the-worlds-top-startup-ecosystems-
silicon-valley-tel-aviv-l-a-lead-the-way/
Stevenson, A. and Soanes C. (2010). Oxford Dictionary of English. New York, NY: Oxford UP.
Sulochana Development Trust (2014). Impact Bangalore Report 2014. Collaborative Community
Team FME (2013). SWOT analysis: Strategy skills. Retrieved from http://www.free-management-
ebooks.com/dldebk-pdf/fme-swot-analysis.pdf
UP Global (2014). Fostering a Startup and Innovation Ecosystem. Retrieved from:
http://blog.up.co/2014/09/08/white-paper-announcing-5-ingredients-fostering-thriving-
startup-ecosystem/
Wheelwright, Steven C., and Clark Kim B. (1992). Revolutionizing Product Development:
Quantum Leaps in Speed, Efficiency, and Quality. New York: Free.
World Economic Forum (2014). The Bold Ones – High-impact Entrepreneurs Who Transform
Industries. Retrieved from:
http://www3.weforum.org/docs/AMNC14/WEF_AMNC14_Report_TheBoldOnes.pdf
Zhang, Junfu (2003). High-Tech Start-Ups and Industry Dynamics in Silicon Valley.
7.2 Websites
10000 startups (n.d.). 10,000 Startups Program. 10000startups.com. Retrieved from:
http://10000startups.com/
Ashbrook, Tom (n.d.). Risk in Entrepreneurship. Entrepreneur.org. Retrieved from:
http://www.entrepreneurship.org/resource-center/risk-in-entrepreneurship.aspx
Bellis, Mary (n.d.). History of Computer Printers. Inventors.About.com. Retrieved from:
http://inventors.about.com/library/inventors/blcomputer_printers.htm
92
Blackman, Andrew (2014). The Pros and Cons of Having Private Equity Firms Invest In Your
Business. Business.tutsplus.com. Retrieved from:
http://business.tutsplus.com/tutorials/the-pros-and-cons-of-having-private-equity-firms-
invest-in-your-business--cms-19887
Blank, Steve (2013). Why the Lean Start-Up Changes Everything. Hbr.com. Retrieved from:
https://hbr.org/2013/05/why-the-lean-start-up-changes-everything
Blank, Steve (2014). Driving Corporate Innovation: Design Thinking vs. Customer Development.
Steveblank.com. Retrieved from: http://steveblank.com/2014/07/30/driving-corporate-
innovation-design-thinking-customer-development/
Blank, Steve (2014). Engineering A Regional Tech Cluster - Part 3 Of Bigger In Bend. Forbes.com.
Retrieved from: http://www.forbes.com/sites/steveblank/2014/01/16/engineering-a-regional-
tech-cluster-part-3-of-bigger-in-bend/
Bloch, Richard (n.d.). Business owner's Playbook. Acquiring Another Company. Thehartford.com.
Retrieved from: http://www.thehartford.com/business-playbook/in-depth/business-
acquisition-pros-cons
Bozek, Max Yakin (2012). Human-Centered Design Thinking. Designthinking.postach.io.
Retrieved from: http://designthinking.postach.io/post/what-is-design-thinking
Business Dictionary (n.d.). Entrepreneurship. BusinessDictionary.com. Retrieved from:
http://www.businessdictionary.com/definition/entrepreneurship.html#ixzz3cBLkCWay
Business Insider (2012). 30 Innovations That Will Change The World. BusinessInsider.com.
Retrieved from: http://www.businessinsider.com/30-game-changing-innovations-2012-
8?IR=T
Carpenter, Hutch (2009). The Four Quadrants of Innovation: Disruptive vs Incremental.
Cloudave.com. Retrieved from: https://www.cloudave.com/1129/the-four-quadrants-of-
innovation-disruptive-vs-incremental/
Crowell, Elizabeth (2013). Funding 101, Part 3: Incubators and Accelerators. Thenextwomen.com.
Retrieved from: http://www.thenextwomen.com/2013/04/01/funding-101-part-3-incubators-
and-accelerators
DeBaise Colleen (2013). Five Sources of Money for Your Startup. Huffingtonpost.com. Retrieved
from: http://www.huffingtonpost.com/colleen-debaise/five-sources-of-money-
for_b_4032145.html?ir=India&adsSiteOverride=in
Deccan Heral (2015). Bangalore, Karachi - cheapest cities to live in: survey. Deccanherald.com.
Retrieved from: http://www.deccanherald.com/content/463260/bangalore-karachi-cheapest-
cities-live.html
93
Demers, Jayson (2014). 7 Risks Every Entrepreneur Must Take. Entrepreneur.com. Retrieved from:
http://www.entrepreneur.com/article/238319
Dupree, Steven (n.d.). Crowdfunding 101: Pros and Cons. Gsb.stanford.edu. Retrieved from:
http://www.gsb.stanford.edu/ces/crowdfunding-101
Entrepreneur (n.d.). Business Incubator. Entrepreneur.com. Retrieved from:
http://www.entrepreneur.com/encyclopedia/business-incubator
Espinal, Carlos Eduardo (2014). How to build a tech ecosystem: The essential building blocks for
your city. Thenextweb.com. Retrieved from:
http://thenextweb.com/entrepreneur/2014/04/01/build-tech-ecosystem-essential-building-
blocks-city/?utm_source=social&utm_medium=feed&utm_campaign=profeed#
Forbes (n.d.). Jugaad: The Art Of Converting Adversity Into Opportunity. Forbes.com. Retrieved
from: http://www.forbes.com/sites/ashoka/2014/03/23/jugaad-the-art-of-converting-
adversity-into-opportunity/
FindLaw (n.d.). Pros and Cons: Going Public. Smallbusiness.findlaw.com. Retrieved from:
http://smallbusiness.findlaw.com/business-finances/pros-and-cons-going-public.html
Fok, Evelyn and Aggarwal, Varun (2015). Better intellectual property values luring Indian startups
abroad. Articles.economictimes.indiatimes.com. Retrieved from:
http://articles.economictimes.indiatimes.com/2015-04-10/news/61017739_1_graphic-india-
sharad-devarajan-startups
Forrest, Conner (2014). Funding your startup: Crowdfunding vs. angel investment vs. VC.
Techrepublic.com. Retrieved from: http://www.techrepublic.com/article/funding-your-
startup-crowdfunding-vs-angel-investment-vs-vc/
Forus Health (n.d.). 3nethra classic. Forushealth.com. Retrieved from:
http://forushealth.com/forus/3nethra-classic.html
Forus Health (n.d.). Implementation. Forushealth.com. Retrieved from:
http://forushealth.com/forus/Implementation.html
Forus Health (n.d.). Innovation. Forushealth.com. Retrieved from:
http://forushealth.com/forus/Innovation.html
Funk, Jeffrey (2014). GoPro’s Wearable Camera. Slideshare.net. Retrieved from:
http://fr.slideshare.net/funk97/gopros-wearable-camera
Graham, Paul (2005). How to fund a startup? Paulgraham.com. Retrieved from:
http://paulgraham.com/startupfunding.html
94
Hendricks, Drew (2015). 7 Leading Accelerators For Overseas Startups Coming To Silicon Valley.
Forbes.com. Retrieved from: http://www.forbes.com/sites/drewhendricks/2015/02/17/7-
leading-accelerators-for-overseas-startups-coming-to-silicon-valley/
Hess, Edward D. (2012). Creating An Innovation Culture: Accepting Failure is Necessary.
Forbes.com. Retrieved from: http://www.forbes.com/sites/darden/2012/06/20/creating-an-
innovation-culture-accepting-failure-is-necessary/
Hom, Elaine J. (2014). What is STEM Education? Livescience.com. Retrieved from:
http://www.livescience.com/43296-what-is-stem-education.html
Indian Angel Network (n.d.). Who are We ? Indianangelnetwork.com. Retrieved from.
http://indianangelnetwork.com/about
Investopedia (n.d.). Angel Investor. Investopedia.com. Retrieved from:
http://www.investopedia.com/terms/a/angelinvestor.asp
Investopedia (n.d.). Alternative Investments - The Stages in Venture Capital Investing.
Investopedia.com. Retrieved from: http://www.investopedia.com/exam-guide/cfa-level-
1/alternative-investments/venture-capital-investing-stages.asp#ixzz3e6j5IidX
Investopedia (n.d.). Venture capitalist. Investopedia.com. Retrieved from:
http://www.investopedia.com/terms/v/venturecapitalist.asp
IPSE, The Association for Independent Professionals and the Self Employed (2014). PCG responds
to sharp rise in self-employment in latest ONS statistics. Pcg.org. Retrieved from:
https://www.pcg.org.uk/news/2014/02/19/pcg-responds-sharp-rise-self-employment-latest-
ons-statistics
Isenberg, Daniel. Forbes (2011). Dear President Obama: Suggestions for How to Make Start-Up
America Really Succeed. Forbes.com. Retrieved from:
http://www.forbes.com/sites/danisenberg/2011/02/03/dear-president-obama-suggestions-for-
how-to-make-start-up-america-really-succeed/
iSPIRT Foundation (2014). K. Chandrasekhar, Founder of Forus health talks about his product -
3nethra. Youtube.com. Retrieved from: https://www.youtube.com/watch?v=AnlF6SBaWPE
Kalbach Jim (2012). Clarifying Innovation: Four Zones of Innovation.
Experiencinginformation.wordpress.com. Retrieved from:
https://experiencinginformation.wordpress.com/2012/06/03/clarifying-innovation-four-
zones-of-innovation/
Kannan, Shilpa (2014). How McDonald's conquered India. Bbc.com. Retrieved from:
http://www.bbc.com/news/business-30115555
95
Kaul, Aditya (2014). With GoPro Doing Drones, It’s Time to Rethink Wearable Cameras.
Tractica.com. Retrieved from: https://www.tractica.com/wearable-devices/with-gopro-
doing-drones-its-time-to-rethink-wearable-cameras/
Kazakova, Anna. Life as an Investment (2015). Startups: How to get funding?
Lifeasaninvestment.com. Retrieved from:
http://www.lifeasaninvestment.com/money/entrepreneurship/startups-how-to-get-funding/
Kelman, Glenn (2015). Soaring housing costs forces talent to flee Silicon Valley. CNBC.com.
Retrieved from: http://www.cnbc.com/id/102697372
Krishnan, Rishikesha T. (2012). From Jugaad to Systematic Innovation. Disruptive & Radical
Innovation: How are they different? Jugaadtoinnovation.blogspot.in. Retrieved from:
http://jugaadtoinnovation.blogspot.in/2012/08/disruptive-radical-innovation-how-are.html
InnoSupport (n.d.). 1.1.2.2 Incremental, radical and breakthrough innovation. Innosupport.net.
Retrieved from: http://www.innosupport.net/index.php?id=6054
Lebret, Hervé (2013). What’s a start-up? And a spin-off? Startup-book.com. Retrieved from:
http://www.startup-book.com/2013/01/08/whats-a-start-up-and-a-spin-off/
Lebret, Hervé (2015). How do you measure your entrepreneurial ecosystem? Startup-book.com.
Retrieved from: http://www.startup-book.com/2015/03/26/how-do-you-measure-your-
entrepreneurial-ecosystem/
Lünendonk, Martin (2013). HR Reality Check, Working For A Startup Vs. A Corporate Job.
Entrepreneurial-insights.com. Retrieved from:
http://www.entrepreneurial-insights.com/hr-reality-check-working-startup-vs-corporate-job/
Moon, Bernard (2011). Startup 'Pay-It-Forward' Culture Drives Innovation. The Startup America
Partnership. S.co. Retrieved from: http://s.co/startup-pay-it-forward-culture-drives-
innovation
Nagwann, Avani (2012). Micro-Management Versus Macro-Management For Managers.
Sapience.net. Retrieved from: http://www.sapience.net/blog/work-efficiency/169-345-
micro-management-versus-macro-management-for-managers
Newman, Kira M., Tech.co. (2012). A Peek Inside India’s Startup Scene, with Female Founder
Shradha Sharma. Tech.co. Retrieved from: http://tech.co/india-startup-scene-shradha-
sharma-2012-05
Osterwalder Alex (2012). Achieve product-market fit with our brand-new value proposition
designer. Businessmodelalchemist.com. Retrieved from:
http://businessmodelalchemist.com/blog/2012/08/achieve-product-market-fit-with-our-
brand-new-value-proposition-designer.html
96
Owyang, Jeremiah (2014). Uber’s Business Model Reframes Cheaper, Better, Faster. Web-
strategist.com. Retrieved from: http://www.web-strategist.com/blog/2014/02/12/ubers-
business-model/
Padmanabhan, Arvind (2014). Start-up incubators and accelerators in Bangalore. Iedf.in. Retrieved
from: http://iedf.in/index.php/blog/item/start-up-incubators-and-accelerators-in-bangalore
Phadnis, Shilpa (n.d.). Bengaluru stands tall with $2.6-billion venture capital.
Timesofindia.indiatimes.com. Retrieved from:
http://timesofindia.indiatimes.com/business/india-business/Bengaluru-stands-tall-with-2-6-
billion-venture-capital/articleshow/45974103.cms
Raina, Karan (2014). Techfreeks. Whatsapp vs Hike – Is Hike Messenger Better than Whatsapp?
Teckfreeks.com. Retrieved from: http://teckfreeks.com/whatsapp-vs-hike-is-hike-messenger-
better/
Rao, Venkatesh (2007). Disruptive versus Radical Innovations. Ribbonfarm.com. Retrieved from:
http://www.ribbonfarm.com/2007/07/23/disruptive-versus-radical-innovations/
Ravi, Sreekanth (2014). When Launching Your Startup, Consider These 5 Risks.
Entrepreneur.com. Retrieved from: http://www.entrepreneur.com/article/234094
Ryan, Clare (2012). 4 Types of Crowdfunding and What this Means for the Future of Investments.
Utrconf.com. Retrieved from: http://utrconf.com/4-types-of-crowdfunding-and-what-this-
means-for-the-future-of-investments/
Silicon Valley Business Journal (n.d.). About Us. Bizjournals.com. Retrieved from:
http://www.bizjournals.com/sanjose/about-us/
Silicon Valley Daily (n.d.). Venture Capital Links. Svdaily.com. Retrieved from:
http://www.svdaily.com/capital.html
Shah, Anup (2013). Poverty Facts and Stats. Globalissues.org. Retrieved from:
http://www.globalissues.org/article/26/poverty-facts-and-stats
Startup Commons (SC). Startup Key Stages. Startupcommons.org. Retrieved from:
http://www.startupcommons.org/startup-key-stages.html
Stangler, Dane and Wiens, Jason (2014). Break the Gridlock: Unbundle Startup Visa from
Immigration Reform. Rollcall.com. Retrieved from:
http://www.rollcall.com/news/break_the_gridlock_unbundle_startup_visa_from_immigratio
n_reform-231672-1.html
swissnex San Francisco (2014). swissnex startup webinar: the Silicon Valley startup ecosystem.
swissnexsanfrancisco.org. Retrieved from:
http://www.swissnexsanfrancisco.org/event/siliconvalleystartup/
97
The Entrepreneur’s Advisor (2011). Business Incubators and Business Accelerators.
Blog.theentrepreneursadvisor.com. Retrieved from:
http://blog.theentrepreneursadvisor.com/2011/07/business-incubators-business-accelerators/
The Free Dictionatry (n.d.). Venture. Thefreedictionatry.com. Retrieved from:
http://www.thefreedictionary.com/venture
The Global Innovation Index (2014). The Human Factor in Innovation. Globalinnovationindex.org.
Retrieved from: https://www.globalinnovationindex.org/content.aspx?page=data-analysis
The World Bank Institute (2011). India to Accelerate Growth Through Inclusive Innovation.
Wbi.worldbank.org. Retrieved from: http://wbi.worldbank.org/wbi/stories/india-set-
accelerate-growth-through-inclusive-innovation
TiE (n.d.). About Us. Tie.org. Retrieved from: http://tie.org/about-us/
Velayanikal, Malavika (2014). Homegrown Indian messenger Hike launches ‘hidden’ chats to take
on WhatsApp. Techinasia.com. Retrieved from: https://www.techinasia.com/hike-hidden-
chats-20-million-users/
Venkateswaran, Vikram (2011). Can London replace Bangalore and Silicon Valley as the next
technology hub? Trak.in. Retrieved from: http://trak.in/tags/business/2011/09/21/london-
bangalore-silicon-valley-next-technology-hub/
West, Matt (2012). Sustaining vs Disruptive Innovation. Mattwest.io. Retrieved from:
http://mattwest.io/sustaining-vs-disruptive-innovation/
Wikipedia (n.d.). List of educational institutions in Bangalore. Wikipedia.org. Retrieved from:
https://en.wikipedia.org/wiki/List_of_educational_institutions_in_Bangalore#Engineering
Yocco, Victor (2015). Five Characteristics Of An Innovation. SmashingMagazine.com. Retrieved
from: http://www.smashingmagazine.com/2015/01/29/five-characteristics-of-innovations/
Yourstory (n.d.). Jugaad Innovation: A Frugal and Flexible Approach to Innovation for the 21st
Century. Yourstory.com. Retrieved from: http://yourstory.com//2012/09/jugaad-innovation-
a-frugal-and-flexible-approach-to-innovation-for-the-21st-century/
YourStory (n.d.). Our Story. Yourstory.com. Retrieved from: http://yourstory.com/our-story/
YourStory (2015). Starting up new business in India made easier. Five forms merged into one e-
form. Yourstory.com. Retrieved from: http://yourstory.com/2015/05/new-business-made-
easier/
98
8. Appendix
8.1 Startup development phases and funding timeline
Source: Kazakova, 2015
Source: Startup Commons (SC)
99
8.2 Domains of the entrepreneurial/startup ecosystem
Source: Isenberg, 2011
100
8.3 The Global Startup Ecosystem Index
Source: Startup Genome, 2012, p. 3
Source: Startup Genome, 2012, p. 2
101
8.4 Silicon Valley vs. Bangalore: Statistics
Source: Startup Genome, 2010, p. 110
102
Source: Startup Genome, 2012, p. 112
Source: Statup Genome, 2012, p. 111
103
Source: Statup Genome, 2012, p. 9
104
8.5 Interviewing guide
The interview is driven in English by email, skype or direct meeting. The following questions are
my areas of research:
Question 1 – Startup ecosystem: definitions, criteria and key components
In my master thesis, I am first considering what innovation really means and what innovation
ecosystems are made of.
1. What are your definitions of innovation and entrepreneurship?
2. What are the criteria that make a startup ecosystem emerge? Explain.
3. What are the key components which make an innovation ecosystem successful? Why?
Question 2 – Startup ecosystems of Silicon Valley and Bangalore
According to your expertise and experience, please share with me your representation of each
innovation ecosystem:
1. What made Silicon Valley/Bangalore such an attractive place for innovation and
entrepreneurship? What are the reasons behind their respective success?
2. Type of innovation: High Tech (SV) / Frugal innovation (Bangalore). Could you explain
how you perceive the differences between these two types of innovation?
3. Stakeholders: Describe the features and importance of each of the six critical groups for
each ecosystem: Entrepreneurs, Community & Culture, Government & Regulation,
Universities & Education, Incubators & Accelerators and Funding & Capital Sources.
4. SWOT: Summarize the Strengths, Weaknesses, Opportunities and Threats for each
ecosystem.
Question 3 – Silicon Valley versus Bangalore: Discussion
More precisely, I decided to compare Silicon Valley with the startup ecosystem of Bangalore. What
do you think are:
1. Similarities
2. Differences
3. Performance and Potential
105
8.6 Profile description of the interviewees
Vikram Ahuja – Experienced entrepreneur with past experience in Product Management and
Management Consulting focusing on consumer-focused products in travel, e-commerce, retail,
telecom and digital media for both mobile and web. Deeply passionate about technology,
innovation and consumer-focused services. Currently on a quest to understand how mobile
commerce and online retail startups will dominate the emerging markets landscape, especially
India. He is the Founder of Byond Travel - an experiences and travel platform, which is creating
uniquely personal travel journeys for the new generation traveler. Vikram is also a Partner at
Kyron Global Accelerator, enabling global Fortune 100 industry leaders to work closely with
startups. Previously he has co-founded and led key functions for one of the middle-east's early
startup success stories (Triperna / Cobone). Vikram also worked across multiple domains (retail,
financial services, media) as a strategy and technology consultant across 5 continents.
(Source: https://in.linkedin.com/in/vikramahuja1)
Sartaj Anand – Sartaj is a parallel Entrepreneur with an unreasonable dream to positively impact
1 Billion Human lives within his lifetime. This is the core reason and motivation for all his actions
and, as a result, he enables other individuals and organizations around him to create exponential
social and economic impact globally. Some of the networks Sartaj belongs to include TED, Ashoka,
Sandbox, Social Good, UN Foundation, Kairos Society, Pearson Foundation, SIETAR, etc. He has
traveled, worked and co-created in more than 40 countries spread over 4 continents so far and now
focuses on providing authentic thought leadership, driving empathic conversations and creating life
changing experiences. (Source: https://goo.gl/p2EYCi)
Jai Asundi is Principal Research Scientist at CSTEP (Center for Study of Science, Technology and
Policy). He holds a B.Tech degree from IIT Bombay and M.S. & Ph.D. degrees from Carnegie
Mellon University, Pittsburgh. His interests lie in the areas of information technology for
development, emergency and disaster management, software engineering and project management.
He is currently working on the development of a decision support system for public policy
problems. He is a senior member of the IEEE was a faculty at the University of Texas at Dallas.
(Source: http//:www.cstep.in/)
Ajay Bam - Proven serial entrepreneur and accomplished global product management, marketing
and technology executive leadership with 12+ years of experience with startups (one exit) and large
106
corporations in digital commerce (mobile and web technologies with expertise in billing, payments,
NFC, Rewards/loyalty programs), retail and financial services. Solid track record of launching new
ventures & products in emerging markets (BRICS), inventions, product innovation, strategy and
revenue growth. Is a multi-cultural and multi-dimensional leader. Currently lecturer in
Entrepreneurship at UC Berkeley’s Haas School of Business. Specialties: Entrepreneurship, Mobile
commerce, Innovation, Payments, Billing, Strategic leadership, Board Advisor to startups,
Executive Management, Retail solutions, POS solutions, Web technologies, Saas, Go-To-market
Strategy. (Source: http://www.swissnexsanfrancisco.org/team/ajay-bam/#sthash.fRGCSqo6.dpuf)
Alisée de Tonnac - Alisée graduated from HEC Lausanne and obtained her Master in International
Management at Bocconi University with highest honors. She lived eight years in Singapore and two
years in Silicon Valley. She worked as product manager for luxury brands at L’Oreal Group and
was part of the Italian team at Voyage Prive, a leading European startup. She was a member of the
Harvard Model Congress Europe where she won the Award of Excellence. After traveling for a
year around the world to set up the first edition of Seedstars World, Alisee is now managing the
company and taking it to the next level! (Source: http://www.seedstarsworld.com/about-us/)
Aditya Ghose – Professor Ghose holds PhD and MSc degrees in Computing Science from the
University of Alberta, Canada (he also spent parts of his PhD candidature at the Beckman Institute,
University of Illinois at Urbana Champaign and the University of Tokyo) and a Bachelor of
Engineering degree in Computer Science and Engineering from Jadavpur University, Kolkata,
India. While at the University of Alberta, he received the Jeffrey Sampson Memorial Award. His
research has been funded by the Australian Research Council (Chief Investigator on 8 ARC
Discovery and Linkage Projects), the Canadian Natural Sciences and Engineering Research
Council, the Japanese Institute for Advanced Information Technology (AITEC) and various
Australian government agencies as well as companies such as Bluescope Steel, CSC and Pillar
Administration. His research has been published in the top venues in service-oriented computing
(SCC and ICSOC), software engineering (ICSE and ER) and AI (Artificial Intelligence Journal,
AAAI, AAMAS and ECAI). He has been an invited speaker at the Schloss Dagstuhl Seminar Series
in Germany and the Banff International Research Station in Canada. He has also been a keynote
speaker at several conferences, and program/general chair of several others. He is a senior
technical advisor to several companies in the areas of constraint programming and business
process management, both in Australia and Canada. He serves as assessor (Ozreader) for the
Australian Research Council and as an external reviewer for the research funding agencies of
107
Canada, Israel, Austria, the Netherlands, Ireland and South Africa. Professor Ghose is a Research
Leader in the Australian Cooperative Research Centre for Smart Services, Co-Director of the
Centre for Oncology Informatics at the Illawarra Health and Medical Research Institute and Co-
Convenor of the Australian Computer Society NSW SIG on Green ICT. He is a past Vice-President
(2010-2014) of CORE (and a current member of its executive), Australia's apex body for computing
academics. He is also President of the Service Science Society of Australia and a Fellow of the
Institution of Engineers (Australia). (Source: http://www.uow.edu.au/~aditya/)
Suhas Gurumurthy - An enthusiastic and motivated individual, an Automotive Engineer by
qualification, with a desire to explore new technologies and ventures, to attain a great deal of
success. His strong functional knowledge and analytical skills make him a competent professional.
He has a wide range of experience working in different fields and also possesses a great deal of
interest towards understanding different roles and responsibilities. He has a rich experience
working across verticals, right from providing design solutions to being an analyst, from customer
facing roles to handling teams, from project management to business development. He has a special
interest towards upcoming technologies, especially with respect to automobiles. He looks ahead
and beyond just Design and Engineering of cars. In his current role of business-development, he
does concept generation and architect potential innovation partnerships between companies which
work on the various technologies that can be used on cars, especially for the Indian scenario.
Considering Autonomous vehicles and IOT to be the future of mobility, he would love to bring
breakthrough innovations by building Coalitions in India.
(Source: https://in.linkedin.com/in/suhasgurumurthy)
Prateek Khare – Prateek is currently the Head of Entrepreneurship and Innovation at swissnex
India, a Swiss government body connecting India and Switzerland in the fields of science, art,
education and innovation. He is an avid reader, blogger & guitarist. He has worked on diverse
business domains with entrepreneurs, SME's and established businesses from India, Switzerland,
Scotland, England and Americas. (Source: https://about.me/prateekkhare )
Rishikesha T. Krishnan – Rishikesha T. Krishnan is Director and Professor of Strategic
Management at the Indian Institute of Management Indore, India. From 1996 to 2013, Professor
Krishnan was a member of the faculty at the Indian Institute of Management, Bangalore (IIMB),
India. Professor Krishnan was a Visiting Scholar at the Center for the Advanced Study of India,
University of Pennsylvania (Fall 2008), and at the Indian School of Business (ISB), Hyderabad
108
(2011-12). He held the Jamuna Raghavan Chair in Entrepreneurship at IIMB from 2007-10.
Professor Krishnan’s main areas of interest are strategy and innovation. He was listed among the
Thinkers50 India most influential thinkers in management from India (2013) and jointly received
the special Thinkers50 India Innovation award (2013). Earlier, he received the Dewang Mehta
Award for Best Teacher in Strategic Management in 2010. Professor Krishnan has served on a
number of committees set up by the Government of India, Nasscom and CII related to innovation in
India. He is on the board of Sundaram Asset Management Company Ltd., and is a trustee of the
Foundation for Excellence India Trust (www.ffe.org ), an organization committed to helping
economically underprivileged and academically talented students complete their higher education
through one of India’s largest scholarship programmes. Professor Krishnan writes extensively, and
has more than 140 publications spanning outlets that include refereed journals, the popular press,
case studies, book chapters, and books. Professor Krishnan’s book From Jugaad to Systematic
Innovation: The Challenge for India, published in February 2010 identified the challenges faced by
India in enhancing industrial innovation and proposed an agenda to enhance innovation output
(see http://jugaadtoinnovation.blogspot.com for details and updates). In his comments on the book
jacket, MindTree Chairman Subroto Bagchi wrote: “Rishikesha Krishnan is doubtlessly among
India’s foremost chroniclers of the innovation journey. His book is a great account of the history of
innovation in the post-industrial era. He has his pulse on issues that hold Indians from going to the
next level.” Professor Krishnan’s recent book, 8 Steps to Innovation: Going from Jugaad to
Excellence (co-authored with Vinay Dabholkar, and published by Harper Collins in March 2013),
outlines a systematic path for organizations to build innovation capabilities. Professor Krishnan
holds an M.Sc. in Physics (5-year Integrated Programme) from the Indian Institute of Technology
at Kanpur; and an M.S. in Engineering-Economic Systems (now Management Science &
Engineering) from Stanford University. He obtained his doctorate from the Indian Institute of
Management, Ahmedabad, where he won the outstanding thesis proposal award instituted by the
Industrial Finance Corporation of India.
(Source: http://www.iimidr.ac.in/iimi/index.php/rishikesha-t-krishnan)
Mauktik Kulkarni - Mauktik Kulkarni is a neuroscientist, entrepreneur, public speaker, author and
film-maker. He has worked with several healthcare and IT start-ups in executive capacity and is
currently the co-founder and COO of Wazzat Labs, an Indian start-up based in Hyderabad. As a
consultant at TiE's Bangalore chapter, he actively helped several start-ups in the Bangalore
ecosystem. He has delivered several lectures on neuroscience, entrepreneurship, traveling, etc. In
addition to being a guest columnist in the popular press, he has also published a memoir titled 'A
109
Ghost of Che.' 'Riding on a Sunbeam,' his first documentary as an executive producer and co-
anchor, will be released in the second half of 2016 and his book is currently being adapted into a
feature film. (Source: Mauktik Kulkarni, personal communication, June 15, 2015)
Hervé Lebret - Hervé graduated from Ecole Polytechnique (Palaiseau, France) in 1987, SupAero
(Toulouse, France) in 1989 and obtained an MS from Stanford University in 1990. He worked for
the French department of defense for two years and went back to academics to obtain his PhD in
electrical engineering from Université de Rennes in 1994 (with one year spent at Stanford
University again). Hervé stayed in academics from 1994 to 1997 as dean of studies of the ENSTA
(Paris, France) and at Onera (Palaiseau, France). In 1997, he left the academic world to begin a
new career in venture capital with Index Ventures in Geneva, Switzerland. Working at EPFL since
2004, he started as a licensing officer in the Technology Transfer Office. In mid-2005, he helped in
launching and took charge of the INNOGRANTS. In 2010, Hervé became a Senior Scientist in the
field of high-tech entrepreneurship and his research field concentrates on academic spin-offs,
including Stanford University and Silicon Valley.
(Source: http://www.epfl-innovationpark.ch/epfled/?team=herve-lebret)
Barbara Maim - Originally from Lausanne, Switzerland, Barbara has an engineering degree and a
PhD in Computer Graphics. In 2008, she co-founded her startup Minsh, specialized in social web
and mobile applications. 2 years later, she moved to Bangalore to leverage the Silicon Valley of
India’s bountiful opportunities. Today, with one foot in India and another in Switzerland, she is
working with her partner and co-founder, Jon Maim, to build high quality mobile apps for private
communities. (Source: http://www.epfl-innovationpark.ch/epfled/?team=speaker-name-4)
Harshith Mallya – Harshith is currently working at YourStory Media Pvt Ltd, Asia's leading digital
media platform for startups & SMBs in Bangalore, India. He has been closely tracking the Indian
and global startup ecosystem for over a year and covers stories about startups, entrepreneurs and
mobile apps. He graduated from Manipal Institute of Technology, Manipal, India with a Bachelor’s
degree in Mechanical Engineering in 2014 but was more passionate about the world of startups
and hence decided to work at YourStory to get a better understanding of the startup ecosystem and
understand how to run successful businesses. Source: Harshith Mallya, personal communication,
June 22, 2015
110
Rich Mironov – Rich is a veteran of six tech start-ups (including as founder/CEO and VP
Products/Marketing) and CEO of Mironov Consulting. Since 2006, he’s provided full-time and
interim product management consulting/mentoring to more than 75 large and small technology
companies. He wrote “The Art of Product Management,” and has been relentlessly blogging about
products since 2001. He founded the first Product Camps, chaired the first product owner/manager
tracks at the annual Agile conference, and speaks/teaches widely on product strategy, agile,
entrepreneurship and product management organizations.
(Source: http://www.productcampseattle.org/sessions/speaker-biographies/)
Srinivas Padmanabhuni - Dr. Srinivas Padmanabhuni is a Principal Research Scientist and
Associate Vice President at Infosys Labs, the research and innovation arm of Infosys Limited,
Bangalore, India. He is the Vice President of ACM India, and President Elect for the same. A
prolific researcher and thought leader, he has four granted patents, around 15 filed patents, one
published book by Wiley, one book in process, several book chapters, multiple journal and
conference papers, to his credit, in addition to marquee invited talks and editorial positions. He
supervises the Software Engineering research at Infosys. Dr. Srinivas specializes in Software
Engineering, Web services, Service Oriented Architecture, Business Process Management, and
Grid technologies alongside pursuing interests in semantic web, autonomic computing, intelligent
agents, and enterprise architecture. He has been selected for Who’s Who in Asia 2007 first edition,
and Who is Who in the World and Americas 2009 editions. He is an active member of ACM, and
SIGSOFT. Prior to Infosys, Dr. Srinivas has worked in multiple capacities in startups out of
Canada and USA. Dr. Srinivas holds a doctorate degree in computing science from University of
Alberta, Edmonton, Canada. Prior to Ph.D he secured his B.Tech and M.Tech in computer science
from Indian Institutes of Technology at Kanpur and Mumbai respectively.
(Source: http://thesrii.in/team/srinivas-padmanabhuni-2/ )
Tej Pochiraju - Tej brings experience of new product development, R&D and a curiosity for new
technologies to Jaaga. He is helping build the Startup program by focusing on programming and
partnerships. Building upon experience of working with over 100 companies in 20+ countries
across the globe he now runs a lean wireless research and design studio, micrograce, from Jaaga.
(Source: http://jaaga.in/crew/)
Govind Shivkumar - Govind is an investment manager with Jasmine Social Investments investing
in South Asia and Africa in high impact and sustainable organisations across sectors. Prior to
111
Jasmine, Govind worked as an investment manager for about 5 years with LGT Venture
Philanthropy across sectors and geographies. Govind has also worked with Unitus Capital and
Citigroup assisting organisations with applied corporate finance for raising equity capital,
financial engineering, valuation and capital markets listing. He has a Bachelors degree in
Commerce and is a Chartered Accountant.
(Source: http://skollworldforum.org/contributor/govind-shivkumar/)
